Channel Changing

Pressure mounting to sell online, but ROI only now becoming evident

Brisbane, CA  May 21, 2001  Suppliers face mounting pressure from their customers to implement online channel management and to integrate with customers' e-procurement systems, but fewer than two-thirds of suppliers are conducting any online channel management today, according to a new survey.

The survey, conducted on behalf of Trigo Technologies, which offers software to optimize online sales channels, along with independent research on the return on investment (ROI) from online sales channel management software, points to a coming shift in focus among B2B e-commerce software companies toward providing applications for the sell side.

The early focus of the e-commerce market on buy-side solutions such as e-procurement has begun to shift, as sell-side organizations look for new efficiencies and opportunities in online sales, said industry analyst Joshua Greenbaum of Enterprise Applications Consulting (EAC) in Daly City, Calif.

Greenbaum explained that the emerging emphasis on sell-side solutions represented both an opportunity and a challenge for suppliers looking to leverage their emerging e-commerce capabilities. The opportunity lies in dramatic cost reduction per transaction and profiting from additional sales revenue from new online channels, Greenbaum said. The challenge lies in quickly implementing these comprehensive solutions to gain a competitive advantage.

The Trigo survey covered an array of issues, including supplier pain points, perceived barriers, key solution attributes and channel management benefits. Russ Henry, senior vice president of marketing at Trigo, said the company undertook the survey in an attempt to put some data behind what we thought was going on in the marketplace.

All of the surveyed suppliers said they faced an immediate need to respond to a large backlog of requests by their customers to implement online channel management and to address the customers' e-procurement requirements, including selling to them through an e-procurement platform such as Ariba, Commerce One or Oracle.

Despite this high demand, 38 percent of suppliers are still not conducting any online channel management today. A further 53 percent said that they were selling to no more than 20 percent of their customers online. Only 9 percent of the respondents said that they were selling to more than 20 percent of their customers online.

Implementation time is a key barrier keeping suppliers from moving toward online channel management, Nearly half (47 percent) of respondents said that it could take three months or more to go live with their customers.

The types of solutions available to them also are a roadblock: 74 percent of the respondents said they wanted software that would cover all aspects of online channel management  including catalog and order management, connectivity, workflow, alerts, analysis and reporting  as opposed to point solutions that address just one of these functions.

Nevertheless, the survey results indicated that suppliers recognized the bottom line benefits of online channel management, with 74 percent of respondents indicating that the greatest benefits are lower operating costs and improved customer service. Half indicated that benefits included increased revenue opportunities and better customer retention.

Up until this point, people have been cobbling together tools and integration platforms to try to do this, using Big Five consultancies to try put these solutions together, Henry said. Now what we're seeing is that, as a category [of applications] is created here for online channel management, we're able to reduce the cost of implementation and maintenance.

A ROI study by EAC regarding online channel management solutions (including those using of Trigo's Enterprise application or considering moving to this type of software) concluded that online supplier-based systems can decrease implementation and maintenance costs up to 90 percent, reduce catalog management costs up to 50 percent and increase sales transaction volume and customer opportunities by up to 300 percent.

Other benefits of online supplier-based systems cited in the EAC report included reductions in staff (by as much as 25 percent), improvements in overall personnel effectiveness (up to 150 percent) and increased sales transaction efficiency.

Trigo's Henry lauded the increasing recognition of e-commerce's benefits among the supplier community. The value proposition to buyers in using e-procurement is accepted industry-wide, demonstrating a well-understood benefit, Henry said. Fortunately now, suppliers have an opportunity to realize these same efficiencies and opportunities, fulfilling the promise of e-commerce. Our view is that 2001 is the Year of the Supplier.'