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E-Tailer's Digest                                                                                         February, 2000

George Matyjewicz (10051 bytes)

George Matyjewicz
George Matyjewicz of
GAP Enterprises, a management and marketing "solutioning" firm, can be e-mailed at georgem(at)(at)gapent.com. He is the moderator of "E-Tailer’s Digest," an Internet retail discussion forum located at www.gapent.com/etailer/.

Sourcing Product On the Web

Online business-to-business transactions are the wave of the future.

According to industry experts, including many venture capitalists, business-to-business transactions on the Web will be the hottest Internet trend over the next couple of years. According to Forrester Research, business-to-business sales have already surpassed business-to-consumer sales, with annual business-to-business sales projected to soar to $1 trillion by 2003. Another survey, conducted by eMarketer, speculated that business-to-business sales would likely account for 88 percent of all Internet dollar transactions over the next three years.

Let’s compare those numbers with the statistics for Internet retail sales of gifts and collectibles. In 1998, Web sales were $621 million, or 1.2 percent of total retail sales of gifts and collectibles. Sales for 1999 were around $1 billion (or 2 percent of the total market), and the projections for the future are $1.6 billion (3 percent) in 2000 and $7.2 billion (11 percent) in 2003.

Who’s Involved?

A market research study conducted by USGift.com, a business-to-business site currently in development, found that 50 percent of “mom and pop” gift retailers are online. Roughly 70 percent of those who were online said that they use the Internet to research new products, and 82 percent said that they would purchase online if they had the opportunity.

Hallmark is now requesting that all of its retailers order directly online. In time, Hallmark will do what many businesses in other industries have done: It will begin to distribute its products exclusively through the Net. Once that happens, if you aren’t online, you won’t be able to do business with Hallmark.

How Does It Work?

How do you conduct business-to-business transactions online? If you are large (or daring) enough, you can purchase directly from the manufacturer, even if it is in a foreign land. If you are smaller, or more cautious, you’ll need to find sites with a “showroom” that allows you to purchase from different manufacturers. In some cases, these showrooms are “trading hubs,” in other words, they bring together manufacturers, wholesalers, and retailers in a secure environment in order to transact business. Exclaim Technologies is one relatively new company that does this.

You may find wholesalers that offer products online. One new wholesaler is USgift.com. It aggregates purchases from retailers and places larger orders with manufacturers, just as an offline wholesaler would do. The only difference is that everything is done electronically. The company has a database of 400,000 gift and home and garden retailers, and it represents manufacturers with more than $500 million in sales. Its site is the testing stage right now, and will be live in March. [USgift.com and Exclaim will be included in an article about business-to-business gift Web sites in the March issue of Gifts & Dec — Editor.]

Other sites worth checking out include Alibaba.com, a “business-to-business shopping mall” that has posted trades from 180 countries; the China Area Network, a trading site based in Shanghai, China, which posts trading opportunities in China; Tradepost-Chat, which lists opportunities in Korea; and the International Export Directory, which you can use to find vendors and products.

Going Direct: A Case Study

Thanks to the Web, you can purchase merchandise directly from overseas sources, which is easier than you might think, as long as you know what you are doing. Peter Greenberg, a travel editor at NBC, imported items for his custom-built home from overseas sources. When he called the U.S. Customs Service to see how difficult it would be to receive the items without the help of a customs broker or an import/export agent, he was told: “It’s easy. Anybody can do it; they just don’t know they can.”

A manufacturer of  handcrafted Christmas items, mainly Santa collectibles, working from a base in Virginia, couldn’t produce enough to keep up with the demand.  This left her unable to introduce new products. So she started looking for other sources. She discussed her predicament with Silk Road Gifts Inc. CEO Andy Sventy, who accumulated 30 years of experience in Sino-U.S. trading while holding posts such as vice president of Avon for the Far East. “Silk Road Gifts is the dot-com spin-off of Peaktop International Holdings Ltd., an established and reputable manufacturer of giftware and collectibles in China with more than 7,000 employees,” said Sventy. “I’ve done business with Peaktop for 20 years, when I was at Avon and in a consulting environment.”

Andy suggested that the manufacturer send him sketches of new products, rather than models. She did, a price was formulated, and a sample was produced. The quality of the sample matched that of June’s handcrafted pieces, so she went ahead and ordered. In the end, she was able to significantly increase her product line, and at a reduced cost.

Purchasing directly from the factory provides a retailer with timely, accurate, and cost-saving results.  “What makes Silk Road Gifts unique is our online business-to-business site and our on-ground sales force, which can also discuss a retailer’s particular needs and customization requirements,” said Sventy. “This means that you can obtain quality merchandise factory-direct.”

The Costs

Buying direct usually involves large quantities, and you may need a letter of credit from your bank to do it. Factories usually have a minimum order amount, which may be as low as $1,000. There are bank costs involved with letters of credit (much like interest on a loan). Then there is the cost of contracting with a consolidator or shipping company. Nonetheless, the sum of these costs is still far less than the total costs of going through an import/export agent or a wholesaler.

There are many resources available online to help you with business-to-business transactions or importing from overseas sources. One of the best resources is the Association for International Business, a nonprofit organization with 10,000 members in 175 countries. It has an online discussion list that helps list members find resources (they were very helpful when I was writing this article).

So, if you aren’t currently involved in online business-to-business, you may want to put that on this year’s “to do” list.

Web Addresses

Alibaba.com — www.alibaba.com
Association for International Business — www.aib-world.org
China Area Network — www.can.com.cn
Exclaim Technologies                — www.exclaim.net
International Export Directory — www.masterpage.com.pl/business/othertrade.html
Silk Road Gifts — www.silkroadgifts.com
Tradepost-Chat — www.tradepost-chat.com/partner/partner.htm
USgift.com — www.usgift.com ?

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GEORGE MATYJEWICZ is Chief Marketing Officer and a Partner at GAP Enterprises, Ltd. a management and marketing Solutioning ™ firm that assists retailers. He is a veteran of the Internet and the computer field, as well as a former retailer and the moderator of E-Tailer's Digest.  Matyjewicz can be reached at (201) 939-8533 Ext 821 or e-mail to georgem(at)gapent.com or write to him c/o G&DA, 345 Hudson Street,  New York, NY 10014