Moving Your Product Catalog Online

Brad Perriello, Industrial Distribution -- Expert Business Source, 4/18/2007 12:43:00 PM

A decade ago, Ken Marble saw the writing on the wall. Everywhere the president of Tacoma, Wash.-based Horizon Distribution Inc. turned, he saw evidence of a coming revolution in the way small distributorships do business.

“About 10 years ago every magazine you picked up, whether it was a trade magazine or a general magazine like Time or Newsweek, was talking about the Internet and ordering online,” says Marble, whose company is a hardware wholesaler. “They were talking about how the Internet would put distributors out of business. We realized that something was going on here. We weren't quite sure what, but we didn't want to get left behind.”

So Marble put together a team to start planning to take Horizon's more than 35,000-item catalog online.Today, the Web site they first envisioned in the late 1990s accounts for more than 20 percent of Horizon's annual sales—and that figure is growing.

Industrial Distribution talked to Marble's team, as well as other distributors and experts who have taken catalogs online, to find out exactly what it takes to do business in the virtual marketplace. What we found may surprise you.

The DIY database
When Marble began looking into translating Horizon's catalog into an electronic database in the late 1990s, companies providing that service abounded. But none of them seemed to be able to give Marble exactly what he needed, and all of them wanted him to pay through the nose for it, he says.

“They wanted a fortune, [but] none of them were complete. None of them matched our inventory completely,” Marble notes.

“It was cost-prohibitive to outsource this thing,” adds Horizon's advertising manager Connie Alseth. “After a lot of research, we decided we could do this ourselves, in-house.”

Horizon bought six scanners and hired college students to scan color and black-and-white images of all the items in their product lines, which were stored in a database.

The company next set up a Web-based system for entering the data on each product, paying people who worked from their homes to enter the specifications.

“We just paid them per character based on each character they typed,” Alseth recalls. “That worked pretty efficiently. When all was said and done, it took us about three solid months.”

Once the specifications of the more than 35,000 products were in the database, along with the scanned images, it was time to install the software systems to produce online versions of the catalog, as well as promotional materials, a CD-ROM version of the catalog—and a printed version as well.

Horizon hired a full-time Web developer to write the software and design the site. By 2001, Alseth says, the new Internet catalog was up and running, including online search capabilities.

Marble estimates the project cost about $100,000, far less than the $300,000 or more database companies had asked.

“It cost maybe 20 percent of what we thought it would cost if we went outside [the company],” he says.

No catalog, no problem
Eric Savelle, president of Waterbury, Conn.'s Tools-Plus Inc., has a similar story—with one crucial difference. For 19 years, Savelle ran his business without producing a printed catalog.

“A print catalog to me was very expensive and [there was] no guarantee that it would work, so I put off doing a print catalog for years. Then the Internet came along, and I said, 'This is something I can do myself,'” he remembers.

Back in about 1998 an employee introduced Savelle to the Internet and asked if he could build a Web site for Savelle's tools distributorship.

“I agreed to let him build us a Web site, but it was more of a list of products—it was very crude,” Savelle says. “Somewhere along the way, from talking to him and noticing what was going on, it seemed pretty clear that the future of our type of business was definitely going to be intertwined with the Web world. That's when I got on the case and started researching it and looking at software platforms and how they would interact with our inventory.”

In 2006, more than 50 percent of Tools-Plus' sales came from its Web site, for roughly the same amount Horizon's Marble paid—about $100,000, Savelle estimates.

But unlike Horizon, Savelle started the process with a database that already contained his product data.

“We already had our SKUs in a database. Internally, we were using computers to invoice customers, place purchase orders and keep track of our sales and financial numbers,” he says.

So he hired some high school students, bought a few digital cameras and began creating product images to go with the data. After finding software that would interact with the company's existing systems, Tools-Plus began offering its first products online in 1999.

Bringing in the hired guns
At Bearing Headquarters in Chicago, with a catalog of more than 280,000 items from upwards of 150 manufacturers, the evolution to online sales took a somewhat different course. Senior vice president Jim Scardina says the company decided to hire an outside firm to design, implement and administer its upgraded Web site.

“We saw an increase in the need for e-commerce in the feedback we received from customers,” Scardina says.

And like Tools-Plus, Bearing Headquarters already had a database of SKUs in place. The challenge, Scardina says, was increasing the Web site's exposure to the “crawlers” search engines such as Google use to examine Web sites—a process called Search Engine Optimization, or SEO.

“We needed to basically upgrade our physical Web site. The redesign was the big-ticket item,” he says. “E-commerce is nice, but if you get to a Web site and it doesn't speak well of itself, people are probably not going to want to venture further.”

Prior to the update of the site, which rolled out in October 2006, only two out of every 10 people who searched online for Bearing Headquarters were actually led to the site. After the redesign, Scardina says, that number increased by roughly 85 percent. The site now accounts for roughly 10 percent of Bearing Headquarter's sales.

The importance of strategy
Paul Jarboe, a product manager for content services at ePlus Inc., a computer and software services provider, says distributors should establish clear goals before plunging into e-commerce.

“Transitioning from print, which is a very cyclical type of environment, to a real-time Web site environment, is often a big jump mentally for these guys. They could spend a year developing a [print] catalog only to find out it's obsolete before it's printed,” Jarboe says. “The important thing is they've got to be looking long-term. It's great to stay competitive day in and day out … but the design of your site and the overall vision has to be [focused on] where you want to be [down the road].”

That means being clear about exactly what you want your Web site to provide to your business, your employees and your customers. Setting those goals ahead of time can prevent problems from cropping up in the future.

“When you're moving online you're not only offering a different way for customers to find your products. You're giving them a different way to place orders. It's no longer just receiving a phone call or a FAX from somebody who's read the catalog,” adds Jeff Pinkerton, director of product strategy for ePlus. “It's really a transition from one business type to another, for example from horse and buggy to car. It doesn't necessarily mean increased cost when compared to catalogs.”

That was Horizon's experience after its e-commerce site launched.

“Because we went electronic with our images and database, we were able to produce our print products a lot more quickly. We actually reduced some staff as a result of getting our images and information electronic,” Alseth notes, adding that virtually every employee in the company got involved in the project. For example, she and Horizon's graphic designer took Web design classes, and the development team consulted with the company's sales staff and solicited feedback from customers as the project moved along.

“It took a committee to really develop [the site],” Alseth says. “We really sat down and planned out exactly how we wanted this to look, and made it as user-friendly as possible.”

“It's critical to have sales input,” adds Marble. “We showed it to customers, too, and got their input as well.”

And the project doesn't end once the site is up and running. Marble regularly checks other e-commerce sites for the latest features and developments, whether it's media retailer Amazon.com, broad-line distributor W.W. Grainger or bookseller Barnes & Noble.

“It doesn't really matter if they're in our industry or not. We're just interested in what other people are doing in the world of online selling,” he says.

Kevin Holmes, Horizon's industrial sales manager, says the company's site has become an indispensable part of its business.

“I can't even imagine a distributor in this day and age not having an online site,” Holmes says. “Virtually anything that a customer would call in for, they can get that information online, whether it's order status, checking on inventory or an invoice, or an MSDS [sheet]. If they call in for it, they can get it online. That becomes a huge service for them and a big labor-saver for us. They simply go online and place an order. It never passes through our inside sales. Within an hour the thing's picked and on the road to the customer. It's a huge time saver.”

Asked what advice he'd give to other distributors contemplating a dive into the waters of e-commerce, Holmes cites the need for a “champion” within the organization.

“We fought it for a long time, because change is difficult and painful. It requires a champion within the organization that's high enough up in the organization to push it,” he says. “Someone in the company needs to have a vision. … If they can get it done, it will pay huge dividends, both for the customer and for their company.”

-- From Industrial Distribution.