eCommerce and

In my last post about showrooms I discussed the question “Who decides what the customer wants to see in a showroom?” We will wrap up this series of showroom questions today, with the last question I proposed, “How can the manufacturer showroom dollars be better spent?”

It’s no secret that manufacturers partner with wholesalers for their showroom space. It’s the details of the incentive programs offered for that space that are written on the backs of napkins, a give and take relationship that is entrenched in the plumbing industry’s brick and mortar traditions.

So how can those incentive program dollars be better spent to reach a national, nay international, market with a complete breadth and depth of product? If you have read my previous posts you may have guessed that I would answer this question with the statement: “partnering with smart eCommerce retailers”.  Smart eCommerce retailers have the ability to showcase an entire product line to a robust demographic.

Search Engine Optimization

Organic search engine results may not cost marketing dollars in a traditional sense, but the cost of a successful SEO campaign isn’t cheap. A successful SEO campaign at minimum will take manpower, research, link building, and analysis.  I can’t tell you how many times I’ve been asked by potential suppliers why they shouldn’t just throw up a web site on their own. There are certainly plenty of examples of that.

It takes a lot of smart people working 40+ hours a week before you turn the heads of Google, Yahoo, AOL, or MSN. Semoz.org’s Rand Fishkin comments on What Makes SEO & SEM So Damn Hard.

Advertising Campaigns

Ranking well organically on Google, as well as all of the major search engines, can make a significant impact on an advertising campaign, Google specifically commands the most market share of any search engine and therefore can make a huge difference.  Google continues to grow and so do the dollars spent on keyword marketing campaigns. Competition gets nasty when you’re talking about less than 11 advertised spots on the first result page of any given Google search. Actual cost of advertising dollars aside, which is a significant cost, keyword management takes time and resources as well. Just look at the number of blogs on the subject.

But the payoff of smart SEO & SEM is priceless; consider the following screenshot for instance…

 

Kudos to our SEO team; 10 of 15 results in the above search direct the customer to PlumberSurplus.com.

For this search on Google, we are the top sponsored link, and the top three Google Product search results, and the top organic result.  The same search returns results for our product on Amazon, AOL Shopping, and multiple comparison shopping engines.

Comparison Engines

Some comparison engines are built around a customers desire to get right to the bottom line: the product they are searching for at the best possible price. Aggressive incentive programs, like offering free shipping, rebates, gift rewards, the entire product offering, etc. assure successful results in the retailer’s ability to provide the product at a reasonable market price. Further, this drives out those competing exclusively on slashing price, in that they may not have all of the items the consumer is looking for or the ability to ship in a fair amount of time with proper packaging, or qualified customer service representatives; allowing those of us with a complete compliment of core competencies to better build the products branding.

Co-Operative Promotions

Who doesn’t like a great deal?  From our experience we know that our customers do.  The cost to the manufacturer to run a traditional promotion goes beyond lower product margins; it can be some of the items that I listed above such as rebates, gift rewards and more. Getting the promotion to the wholesaler with supportive promotional materials is significant. This is not the case for eCommerce, we don’t need physical banners to hang or flyers or handouts, all of our ads can be done electronically, without additional printing or shipping costs. PlumberSurplus.com recently ran a President’s Day Free Shipping co-operative promotion on our Belle Foret offering for one week. This simple promotion saw an increase of 44% in sales over the prior week with no upfront cost.

Link Bait

Incentives go beyond simple dollars in a co-operative business relationship. Simple gestures like providing authorized retailer links from the manufacturer’s web site are invaluable. Jennifer Laycock explains that these links convey a stronger message than “here’s where you can buy our product”.  Rather, it’s a recommendation of the services that follow the click.

Conclusions

The use of the internet is a daily reality for an estimated 301,139,947 end users. Manufacturers across our country spend their day turning out products that are identifiable as A’s, B’s, C’s, and D’s.  In lemans terms their most popular product offering is referred to as their A’s and B’s and so on.  In one Supply Chain Manager’s opinion it’s time for those same manufacturers to look beyond the traditional distribution to market and consider a few select eCommerce napkins.

Here’s the scenario…

Customer places an order for a DeWalt DG2900 Heavy-Duty 2900 Watt Gas Generator. The size and weight of the generator require that the order ship LTL or “Less Than Truckload”; LTL is commonly referred to as freight. At the time the order was placed this particular model was out of physical stock. In an attempt to go that extra mile for the customer we shipped the order direct from the manufacturer and third party billed to our LTL account (carrier to remain unnamed).

The order processed and shipped from the manufacturer as expected. However, going that extra mile proved a long walk.

What we didn’t know at the time the order shipped was that the customer’s ship to address was a construction site. You might ask “why not?” Good question! Ask your carrier to present you with their additional fees schedule and they’ll present you with something called “Accessorial Service Charges.” It can be pages long: corrected Bill of Lading, detention of vehicle with power, lift-gate service, and residential delivery just to name a few. Several of these charges are dynamic charges, like “fuel charges”, which are calculated in real time and change regularly. If you attempted to identify every possible scenario at the shopping cart for checkout, shopping cart abandonment would go through the roof, due to excessive over estimates for shipping.  This creates a hole in the system that will continue to siphon funds if not corrected.

One of these Accessorial Service Charges is what’s referred to as “Limited Access Pickup or Delivery.” The additional note is “churches, construction sites, schools, etc.” Who knows what etc. refers to, possibly the driver’s whim? Did you catch construction sites? The long walk begins. At the time of delivery, the driver tacks on a limited access pickup or delivery fee as well as a corrected Bill of Lading fee to be paid at the time of delivery by the consignee or customer. As you might guess the personnel at the delivery site generally have no authority or means for paying these additional fees. The delivery attempt is abandoned by the driver and we are quickly contacted by our customer. I assure you this is NOT the customer experience PlumberSurplus.com is shooting for.

You see, the Bill of Lading that is generated at the time of pickup is the contract between shipper and carrier. Once in transit, all additional responsibility, not identified prior to shipment, is the burden of the consignee or customer. And by the way there is now a “redelivery” fee assessed, because the initial delivery attempt was abandoned. In this case, as the shipper, the only way to remove these charges as a customer burden was to refund the customer’s credit card for those fees. The customer still had to make the extra effort of ensuring funds were physically available at the time of redelivery.

The moral of the story is when you plan to go that extra mile for the customer, make sure you complete the journey. We’ve since done the extra work to amend our LTL contract to include all accessorial services as the burden of the shipper, removing any responsibility of the consignee. There is more work to be done to insure we are covering actual shipping costs at the shopping cart, but the customer experience is now intact.
By the way, by amending your LTL contract to include all accessorial services as the burden of the shipper, you’ll also then save yourself the “corrected Bill of Lading” and “redelivery fees”. Hole PLUGGED!

There’s a saying that pops up around the office from time to time, “You don’t get what you deserve, you get what you negotiate”.  It’s taken from the book written by Chester L. Karrass, which none of us have read.  We originally came across the phrase when fellow blogger, Ellen, told us about how her Grandma taught it to her while she was growing up, and went as far as putting the poster in Ellen’s room.  The teachings paid off, as Ellen now enjoys going to car dealerships and negotiating a car sale, and not buying, just for the fun of it!  I’m not sure we always apply the saying correctly but in the case of our partnership with DeWALT we got more than we negotiated for.

You can read Vanessa’s original post here which highlights the reasoning behind our Google Checkout Sweepstakes and how we accomplished the promotion by partnering with DeWALT.

When I originally approached DeWALT to provide advertising in exchange for product, I simply communicated our planned banner placement. In return for a DeWALT product PlumberSurplus.com would place the following banner on the checkout page during the last quarter of 2007. Not only did DeWALT agree to support the promotion they graciously provided two DeWalt DC011 Heavy-Duty Worksite Radio/Chargers.

With two DeWALT DC011 worksite radio chargers in hand we ran the Google Checkout Sweepstakes through the first quarter of 2008. In an effort to show our appreciation for DeWALT's generous participation, and to serve the goals of the promotion, we extended the banner placement to a rotating banner on the homepage and several other high traffic areas.

Believing that communication is important in any co-operative partnership, I emailed DeWALT some data regarding our sales growth.  This growth has sparked the cooperative promotion to continue.  DeWALT has graciously offered us another sweepstakes product in an effort to keep the promotion going. 

Congratulations to our first quarter 2008 winner and good luck to each of you in the next round of our Google Checkout Sweepstakes. DeWALT is happy to announce its continued participation!
 

In my last post I discussed the question “Showrooms: Do They Reach the Customer that the Manufacturer is Targeting?”  The showroom series continues today as we will focus on the second question I proposed, “Who decides what the customer wants to see in a showroom?”

In my last post I stated, “Simply put, these showrooms are seen by manufacturers as an opportunity to physically show their wears.”  There is an alternative to the showroom model though; the internet provides a viable solution to display a large product offering with low overhead costs.  The internet is also a vehicle to efficiently offer consumers vast product offerings, and robust data.  Exploring the traditional showroom model will help us arrive at this conclusion.

Showrooms can range anywhere from several hundred square feet to an excess of 25,000 square feet. Both the sunk costs as well as the recurring costs of these showrooms grow proportionally with the size of the showroom.  Not only does size increase the costs associated with the showroom, but the complexity of the showroom can raise costs exponentially.  I classify these showrooms in to three main types: business card, project based, and living spaces.

The Business Card

Here is an example of a typical local wholesaler showroom. These showrooms serve more as a business card for anyone who walks through the door. It quickly identifies that this business serves the plumbing industry. Icons such as the toilet and pedestal sink, help set this environment. Wall hangings establish the technical abilities of the wholesaler.  As manufacturers try to improve the ways in which they showcase products, more detailed and intricate showrooms have been developed, such as the project based showroom.

The Project Based

Project based showrooms are similar to studio shots in the photo industry, these studio showrooms allow customers to enter complete project layouts that highlight specific products, say the toilet and sink combination, while providing the design of the entire room to showcase what the products could look like in a well designed setting.

The Functional Living Space

Plumbing industry showrooms move well beyond “studio shot” showrooms to fully functional living spaces.  These showrooms not only showcase the products in a well designed room but they are also fully functional, with running water, lighting, etc.   I’ve watched wholesalers spend anywhere from several months to well over a year in building or remodeling these showrooms.


“Who decides what the customer wants to see in a showroom?”

In answering this question I have to first state, I’ve never set up a showroom, but am familiar with the subject after years of supply chain management experience in the field.

If you have, there’s no doubt that a lot of work goes into it and many questions have to be carefully thought out and answered before you begin:

• What do you have to spend?
• How much space do you have available?
• What manufacturer’s do you partner with?
• Which products should be highlighted?
  

The list goes on and on. For the purpose of this blog we only have to look at a single question to show the limitations of the traditional wholesaler showroom, “How much space do you have available?” PlumberSurplus.com  currently offers products from more than 175 manufacturers representing tens of thousands of active products. Let’s say we sell 50,000 products and limit the number of products in our showroom to the top 1%. A bit of math will help us here.

50,000 products x .01 = 500 products

Let’s estimate that each product has a showroom footprint of 3 feet x 3 feet. That’s 9 square feet.

500 products x 9 square feet = 4,500 square feet of showroom

I’m no mathematician but according to my calculations this works out to be 4,500 square feet of showroom.  That doesn’t even include the rest of the layout, such as hallways, walkways and entries, just to sit the top 1% of your available product line. From here you can only imagine the associated ongoing costs of showing a measly 1% of your available business. If you are not familiar with the plumbing industry it is common practice for wholesalers to expect 20% of their product offering to produce 80% of the revenue.  If we used our example above and applied it to the rest of the industry we would need 20 times the amount of space in our previous calculation to showcase 20% of our available products.  Now for those of you who don’t feel like getting out your calculators that comes to a whopping 90,000 square feet of showroom space needed. Can anyone say the word “overhead”?

What does all of this mean?  It means that when you enter a showroom, the products shown are the top 20% performers of that manufacturers or wholesalers line.  That doesn’t necessarily mean that those are the items the consumer wants to see.

The Alternative

The internet offers a cost effective manner for showcasing a breadth and depth of product not easily replicated with the traditional showroom!  I know it’s not revolutionary, but if you read my last post you would remember that the plumbing industry is still very traditionally structured.  Let’s take our previous examples above.  In using the internet as our showroom to showcase the 50,000 products we previously discussed, we need a grand total of 0 square footage of showroom space.  So now that we know that there is a viable alternative to this showroom issue, the next post will discuss “How can the dollars behind manufacturer showroom incentive programs be better spent?”

I was recently perusing the plumbing, heating, and cooling industries monthly staple, The Wholesaler, December 2007 issue. The Wholesaler highlights the news, trends, and happenings for the industry’s distribution channels.

Each month I’m struck by the number of articles that, summarized, celebrate the remodeling, expansion, or establishment of new wholesaler showrooms across our country. Simply put, these showrooms are seen by manufacturers as an opportunity to physically show their wears. Manufacturers like Kohler, Moen, Delta, and others look to entice customers; dare say end users, to purchase their product offerings using this tried and true brick and mortar channel.

As an eCommerce company, our showroom is far from traditional. Our showroom is dynamic and far reaching although we have "0" square footage; in other words, our showroom is the internet.  As a Supply Chain Manager, ever time I read on of these articles touting some wholesalers' Taj Mahal showroom, I ask myself the following three questions:

1. Showrooms reach a particular customer, is it the customer that manufacturers really want?
2. Who decides what the customer wants to see in a showroom?
3. How can the $’s behind manufacturer showroom incentive programs be better spent?

Look for the answers to these questions as I look further in to this “Tried & True” channel.

“Showrooms reach a particular customer, is it the customer that manufacturers really want?” 

An elementary understanding of the plumbing industry’s distribution model is necessary in answering this question. It generally looks something like this:

If you yelled “confusing”, correct!  In looking at the journey of a product, from manufacturer, each stop on the way is, in some way, with a customer.  But at the end of the day if the product doesn’t reach the end user the rest is simply an effort in futility.

Where then are the showrooms you ask? Just through the doors of the wholesaler. Referring back to our chart, you might notice that there’s no arrow from the wholesaler to the end user.

As 1 of the 301,139,947 end users, you’re considering remodeling your bathroom. All you know is you want to replace your old dingy faucet. It isn’t likely you’ll locate 1 of the 1350 wholesalers with names like McJunkin Corp., EMCO LTD., and Johnstone Supply, Inc. even if your fingers are doing the walking. I didn’t pick those names from obscurity either; they’re ranked among the top 10 national wholesalers by, The Wholesaler, August 2007 issue.

But should you come upon the doors of a wholesaler, no matter how inviting they may look, I assure you the end user isn’t welcome. There is no opportunity for the end user to purchase anything sitting on a wholesaler’s showroom floor, no matter how shiny that Danze faucet is. Before I move on let me give you a quick note about retail: Space, Space, and Space.  Retail only stocks, at best, the top 20% of any given product line, several A’s and some B’s, meaning their top selling products.  So if you think you’ll find that exact faucet at retail, chances are you’ll be disappointed standing in the aisles of your big-box-store.

The showroom customer is the contractor.  Even if the showroom is successful in convincing the contractor they prefer American Standard over Price Pfister, the big box model tells us the Do-It-Yourselfers aren’t asking the contractor. And if they do solicit the contractor for installation, isn’t the contractor going to cater to the end users interest?

PlumberSurplus.com saw three key shortfalls of the showroom:

1. 1350 Wholesaler locations vs. 301,139,947 End Users
2. The end user is disenfranchised from the showroom
3. Retail provides limited breadth and depth of product
   

To overcome these shortfalls, PlumberSurplus.com complicated the diagram in an effort to simplify purchasing for the end user.
By establishing purchasing relationships with the manufacturer, manufacturer’s representative, and wholesaler, PlumberSurplus.com is able to tap into the 301,139,947 end users by bridging their disenfranchisement while providing a breadth and depth of product unequaled by a single channel.

Regardless of the project, the end user is able to research complete manufacturer product offerings across multiple manufacturer lines resulting in purchasing at a reasonable price without ever having to understand either of the above diagrams. Isn’t that the customer the manufacturer ultimately desires?

Next post, “Who decides what the customer wants to see in a showroom?” Understanding breadth and depth of product.