Sales from Web sites specifically designed to sell products to business are on the rise. Some estimates report that sales from b2b sites could triple from $43 million in 1998 to $1.3 billion by 2003. The reasons for this climb are simple: virtual marketplaces provide the purchaser with a single source solution by providing broad product selections, ease of doing business and cost savings. For distributors who offer maintenance, repair and operating (MRO) supplies, the time is now to get involved in virtual marketplaces.

Virtual marketplaces for the b2b sector work in the same manner as the consumer sites. Buyers enter a virtual marketplace and browse through online catalogs. In most cases, there are catalogs from several vendors to offer the buyer comparison shopping advantages. For example, buyers would be able to browse through maintenance supply catalogs to select the right supplies or parts needed for repairs. Typically, photos and physical characteristics accompany the pricing information.

In some Web sites, the buyer can actually have the vendors in the marketplace compete for their business. In this case, the buyer selects the type of product they want and places a bid request with specific product specifications to marketplace vendors. In return, the buyer gets responses from vendors wishing to participate in the bid process. The buyer reviews the bids and places the order. Throughout this entire process, requests, responses and orders are done electronically, which allow orders to be completed in minutes versus days under the old system of purchasing.

Cyber Business and the Distributor
The previous ideas discuss how virtual marketplaces work from the buying side of the equation. But how do the maintenance supply distributors who participate in them benefit from the process? For this article, we’ll focus on the most important elements that can lead to better revenue totals: having an Internet presence, expanding customer bases and having better management control.

Internet Presence:
Companies participating in virtual marketplaces are typically medium to small in size. Many of these companies do not wish to commit the capital resources required to offer an interactive Web site that allows customers to place orders electronically over the Internet. Through the emergence of virtual marketplaces, these companies can now have this ordering functionality, already created through the b2b site, with a substantially smaller investment than if they tried to create it themselves.

When distributors sign an agreement to become a vendor in a virtual marketplace, the distributor provides the b2b site with a product catalog, or sheet, with all of the specifications of the product included. The organizers take the information, usually in the form of an electronic spreadsheet or hardbound catalog, and add it to their product marketplace. Once in the network, distributors can begin receiving electronic orders and bid requests for their maintenance supplies. Typically, distributors receive an e-mail that a request for their services has been issued. In some cases, the e-mail may contain the specifics of the request. In other cases, the distributor may tap into a link that logs them into the supplier side of the virtual marketplace. Once there, the distributor can review the specifics of the quote and respond accordingly.

Expanded Customer Base:
Before cyber business came into existence, companies depended on its salespeople to forge lasting relationships with customers who, in return, ordered supplies through them. While this is still an important method in growing a business, virtual marketplaces offer significant opportunities to expand into new geographic markets and revitalize relationships with buyers in existing markets.

As a member of a virtual marketplace, distributors gain exposure to hundreds or thousands of potential buyers that wasn’t possible in the traditional sales cycle. This exposure, either through online catalog review or through the bid submittal process, allows distributors to increase their sales activity, and revenue, without expending as much time and effort. Distributors are not limited to just the purchasers who are surfing the Web. Distributors can encourage their existing customers to join the network for better efficiencies – for both distributor and buyer – created through electronic procurement.

Better Management Control:
For most maintenance supply distributors, the cost to acquire new business is a major concern. In the past, distributors would have had to incur higher overhead costs through the hiring of new field representatives to scour the market for new leads. Through the virtual marketplace, companies now have an Internet sales force working directly for them.

Additionally, virtual marketplaces provide efficiencies that management requires in operating a growing business. Since all of the transactions are completed electronically, a history of all activities is recorded. Reports can easily be pulled to determine the buyer’s name, specific product and quantity ordered and delivery turnaround. Managers can use the reporting capabilities in the virtual marketplace to gain better control of their inventory stock, re-order points and delivery schedules.

Joining A Virtual Marketplace
It is important to realize how the virtual marketplace works, how it makes money to operate and how it works for the betterment of the distributor before making a final decision on joining the network. Here are some quick overviews into the business side of the operation.

Internal Systems:
Before joining a virtual marketplace, several internal questions should be addressed.

• First, does the distributor have the support staff to handle incoming orders?
• Second, does the distributor have proper inventory controls to ensure the product will always be ready for timely shipment?
• Third, is the distributor capable of providing next day delivery and/or service to the buyer without fail?

Distributor’s Role:
A decision to join a virtual marketplace should not be hurried through an agenda or be decided upon after a single internal staff meeting. Research should always be carried out to obtain the most accurate information about the opportunity a virtual marketplace offers and the company who is offering it. The latter point is an important one to consider. Some of the b2b sites cater to the distribution channel while others do not. In some business models, b2b site organizers bypass the distributor and work directly with the manufacturer. Therefore, it is important to determine what business model the site uses before entering into any agreement.

Services Provided:
Once a decision has been made to join a virtual marketplace, the next step in the process is determining what the b2b site will provide in return for a fee. Not all sites are the same and thus not all benefits are the same. For example, some sites offer on-going training on how to use the entire marketplace buying system as a tool rather than just a Web site. These sites have set up special training classes in their regional or corporate offices for its suppliers to attend and learn more about the marketplace system and how to get the most out of being a network provider.

As a member of a virtual marketplace, distributors often get free publicity from its association. Most sites will promote its relationship with suppliers in advertising, public relations, newsletter, trade show event, direct mail and media programs. It is a good idea to include a logo in an electronic file when submitting materials for the online catalog for use in advertising, trade show signage or other marketing collateral.

Fees:
Depending on the site and it’s a policies, a b2b site will typically charge a vendor a membership fee for joining the network. This fee for presenting the distributor’s products and services to purchasers, increasing its customer base, and increasing its bid requests can range anywhere from hundreds of dollars to thousands per year and is typically paid on a monthly basis. The distributor may also negotiate a transaction fee on all goods and/or services sold in the marketplace with the b2b site. Normally, this fee is based on a percentage of sales generated from the virtual marketplace. This percentage can range from a fractional percentage up to five percent.

Conclusion
The amount of MRO supplies offered and ordered through the Internet will continue to grow as more multi-housing and commercial property managers and executives become Web-savvy. At the forefront of the buying cycle will be virtual marketplaces that offer better efficiencies and opportunities for both the buyer and supplier. The time to act is now as the industry makes the transition from traditional ordering to the Information Super Highway. Joining a virtual marketplace can increase the sales activity for a distributor, while making sales process more efficient. In short, it is a win-win situation for everyone that enters the universe called the World Wide Web.

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John Lie-Nielsen, a 30-year veteran of the multi-housing industry, is Chief Executive Officer of HandySource.com, a business-to-business bid and purchase virtual marketplace for the multi-housing and commercial industries. For more information on HandySource, call toll free 1-800-665-9994 or visit their Web site at www.handysource.com.