E-commerce in the school and office products industry

The Internet has revolutionized our lives and the way we do business. The rapid growth of the Internet population and e-commerce throughout the world offers opportunities and challenges to existing businesses. The key opportunity is the potential revenue growth for businesses that sell through the In Internet.

The Internet is a growing channel for office and school products. Brick-andmortar office supply companies are moving online and finding success. Online start ups are also moving into the category to take advantage as sales through this channel continue to grow. In July 2000, consumers spent more than $4 million online. Office supplies account for 3.7% of these online sales and the category ranks eighth with more than $149 million spent online. Continued sales at this rate throughout the year translates to more than $1.2 billion for 2000.

Paper and office supplies rank as the fifth highest business-to-business category in sales. Business-to-business online sales of paper and office products are projected to exceed $6 billion in 2000 and is expected to more than double each year for the next four years.

Major implications for those in the school and home office products business include a shift in the way market dollars flow that will increase the volatility of sales volumes typically enjoyed by established vendors. A strong movement toward e-commerce by both competitors and customers will require those in the channels of distribution of school and home office products to challenge their current assumptions and change their established methods and relationships.

In the current start-up phase of ecommerce, immediate benefactors are national retail outlets such as office product superstores and discount stores. Their dominance in the physical world translates to a natural online advantage versus small or independent stationers, drug stores, food stores, and specialty retailers, who would also like to draw school and home office product consumers to their online sites. As the online shopping phenomenon continues its exponential growth, other winners will be those who have already invested heavily in brand awareness.

ANTICIPATE CHANGING CHANNELS OF DISTRIBUTION

The existence of the Internet has already encroached on the standard distribution channels of certain product categories in the school and home office products business. For example, greeting cards and computer software are two items that are already commonly distributed through use of a digital format wholly online. They are instantaneously available to consumers, and received by downloading the product electronically from the vendor to the consumers' own computer.

The standard greeting card can even be improved when distributed online because of the technology's ability to incorporate animation and sound. In addition, Internet procurement and delivery of online greeting cards saves consumers a trip to the store as well as the cost of postage. Digital greeting cards and software updates are frequently given away free of charge over the Internet. This takes share from office product retailers doing business in the physical world and changes historical channels of distribution.

On a more positive note, not all changes in the distribution channel are negative or disruptive. Some quick acting wholesalers, distributors, and retailers have seized the opportunity ecommerce offers to become even more valuable to their customer base by offering warehousing and distribution services for the online portion of their customers' business. Products are delivered to the customer more costeffectively, and the intermediary has enhanced his value to his customer while exercising his own core competencies. These are all good things.

MANUFACTURERS, WHOLESALERS, AND DISTRIBUTORS BECOME RETAILERS

Surveys show that well established manufacturers and wholesalers would like to continue to sell through time honored channels of distribution. Unfortunately though, direct sales over the Internet will be necessary for some companies to survive.

Most challenging to historical relationships and channels, however, will be competition from new, wholly online entrants. These aggressive, sometimes well funded, market entrants don't have established relationships and are willing to challenge historical channels to gain a stronger foothold in the market. By cutting out the middleman and finding new ways to aggregate and deliver products, these online start-up competitors may force the hands of established manufacturers, wholesalers, and distributors who normally would prefer to continue honoring established channels of distribution.

Among those in the school and home office products industry, wholesalers, distributors, and retailers who sell expensive or complex products such as office furniture, fax machines, printers, shredders, photocopiers, and computers in addition to expensive office supplies such as toner cartridges, may be vulnerable to the shifting distribution channels catalyzed by e-commerce. These companies need to work now to establish themselves as not only a seller of these products but a total service provider (something many of the new online entrants do not possess).