Adam J. Fein: The new era of B2B price comparisons

Few distributors have policies for dealing with online prices, even though many salespeople are already living through the situation described above.   Business customers in every channel are doing more of the pre-sales information gathering activities traditionally handled by their wholesaler-distributors. 

In an earlier column, I described how distributors no longer have a lock on information needed by customers to make purchasing and sourcing decisions.   Manufacturers and other online sources are making such information readily available, giving customers greater bargaining power. (See Customer self-service comes to wholesale distribution.) 

Consider online marketplace eBay, best known for its consumer auctions.  eBay’s Business and Industrial category (www.ebaybusiness.com*) now sells over $1.5 billion of merchandise annually.   The Industrial MRO category lists more than 100,000 items.   (See for yourself at http://business.ebay.com/1266*).   Sellers include wholesaler-distributors looking for new accounts, customers with dead stock or excess inventory, and various online only storefronts.   Some of these products may be counterfeit or gray market goods, although many prices seem reasonable.

Still not convinced that wholesale distribution customers have access to increasingly comprehensive online information for locating and comparing prices?  Then go to http://froogle.google.com*, Google’s free shopping search engine.    

Froogle gathers its listings in two ways.  One, it uses product information submitted electronically by sellers.  Two, Froogle automatically includes products listed for sale on Web pages identified by Google’s automated software scans of the Internet.  In other words, product listings will appear in Froogle whether you take action or do nothing.

Unlike eBay, Froogle does not actually sell any products or promote particular sellers.  They describe their role in the following way:

“Our job is to find the product you want and point you to the store that sells it; we provide objective results based on our calculation of what's most relevant to your search. We don’t accept payment for inclusion in our results themselves, and all advertising that appears on Froogle is clearly labeled as ‘Sponsored Links.’” 
(Source:  http://froogle.google.com/froogle/intl/en_us/about.html*)

My Froogle search for “air compressor,” the top search in eBay’s Industrial MRO category, yielded 593 product listings.  Froogle also offers price comparisons via text messaging, so even a contractor with a cell phone could do a price check from the field.

These developments do not mean that customers will stop buying from distributors because the wholesale distribution channel still performs a unique variety of activities in the marketplace.   Our "Facing the Forces of Change: The Road to Opportunity" study found that about 40 percent of the distribution executives in our study expect their customers to regularly combine online and offline channels. A customer may research and interact online, but then place a call to their wholesale distribution sales representative or visit a branch to make a purchase.

Nevertheless, distributors are likely to feel renewed margin pressure from Internet-savvy customers.  Begin tracking these online developments and use them as a launching pad to generate new strategies for your own companies.  Here are a few ideas to get your conversations started:

• Ask inside and outside sales reps to record every situation in which a customer mentions a price quote from a web search.  Store the information in a central database so you can see how quickly your customers are adapting to the world of visible prices.
• Prior to your company’s next sales meeting, ask all of your sales reps to search for your company’s best selling products and report back on what they learn.
• Discuss which of your products are at risk of becoming more commoditized as customers shop for the lowest price bidder.  How can your wholesale distribution company become a more valuable supplier of services instead of merely a provider of readily available goods?
• Make sure that your company’s site can be found by search engines by including “tags” that correspond to key words in search engines. You may want to hire a company that specializes in optimizing Web sites for online searches.
• Designate one person in your company who will follow new developments related to the availability of online price information.   Make sure that any new insights get communicated to the key business decision makers on a regular basis.

We are still in the early stages of this information revolution.  Wholesale distribution executives should get their companies ready now for the coming challenge of pricing comparability.