by Richard Vurva

While distributors are developing strategies to attract customers in a digital world, dot-com companies, online marketplaces and technology providers are battling for attention from distributors. The fight is likely to build in intensity.

Chalk up the early rounds to companies such as MRO.com and PurchasingCenter.com, which have convinced several leading distributors to participate in their burgeoning networks. But the war wont be settled just among the bigs. Companies also have their sights set on small and medium-sized distributors.

This is a market dominated by medium and small distributors, which is a fact that most people overlook when they look at these portals that have announced partnerships with large suppliers, says Jon Cohen, president of Eventory, which in May launched what it calls the first neutral and non-exclusive e-commerce service for industrial distributors to conduct business on the Internet.

Were betting our business on the strength of the local distributors relationship with its customers, he says.

In addition to going after individual companies, Eventory is also targeting existing distributor groups. It recently signed an agreement with Industrial Network, a buying group of 41 industrial distributor locations with aggregate sales in excess of $500 million, to help member distributors become e-commerce enabled.

Eventory isnt the only company touting the idea of a neutral marketplace attractive to a large number of distributors. Heres how Chuck Sheridan, president and chief executive officer of IndustrialAmerica.com describes his company:

Were a neutral broker in this market, he says. We dont favor any distributor. We dont favor any product manufacturer. Were not beholden to any particular buyer.

Although the company is backed by MSC Industrial Direct, it is appealing to distributors of all sizes to join its exchange. IndustrialAmerica.com recently announced a joint agreement with Prophet 21 to enable the 2,000 distributor users of P21 software to seamlessly integrate into its exchange using Prophet 21s TradingPartnerConnect (TPCx) service. TPCx is a new Prophet 21 division that offers full interoperability with leading end-user focused vertical marketplaces, corporate exchanges and e-procurement hubs.

We want to make sure our distributors have a fighting chance within these exchanges, so we came up with a strategy to offer interoperability with our trading hub to all of these vertical marketplaces, e-procurement hubs and corporate exchanges, says John Seaner, chief marketing officer for Prophet 21.

He says the companys customer base represents more than 10,000 locations, with aggregate annual sales of $35 billion.

We intend to announce strategic alliances with other exchanges and marketplaces to encourage interoperability among trading partners, says Charles Boyle, president and chief executive officer of Prophet 21.

As these companies and others continue to scramble for attention, it creates an enormous opportunity.

Any time theres a lot of change going on, theres an opportunity to try to understand that change and position yourself in such a way that you can take advantage of it, says Chuck Moyer, IndustrialAmerica.coms vice president of product development. There are going to be some fast-moving and smart people in the local and regional distribution levels that are going to become phenomenally successful.

The trick for distributors is to decide if they should align themselves with a single marketplace, more than one, or none at all.

Right now, as a distributor, Im not sure I want to jump on to one particular online marketplace because I dont know if Ill get an order from them, says Bruce Baker of RPM Inc. and president of the Industrial Distribution Association. Whether the customer-driven ones or the distributor-driven ones win, we dont know. It still gets down to the relationship the distributor establishes with the customer. If your customer doesnt care to use a particular marketplace, maybe hell use your company site.

Whatever they decide, distributors dont want to drag their heels for long, according to AMR Research, a company that provides market analysis and advice on e-business strategy. Its research suggests that companies that delay in developing an e-business strategy will be at a significant, and perhaps fatal, disadvantage. AMR predicts only two or three companies in any industry that move quickly to an effective e-business strategy will gain a profound and sustainable advantage over their competition. The end result will be a significant restructuring and consolidation in many industries.

This article originally appeared in the July/August 2000 issue of Progressive Distributor. Copyright 2000.

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