Published In December 2001
Magazines devoted to business-to-business (B2B) e-commerce have been rife with optimism about the “next stage” of a trend that’s coming soon to a computer screen near you. In its most recent issue, ASAP magazine’s highly speculative cover story piece abounded with optimism about the Internet’s future. (See www.forbes.com/ asap/2001/0910/044.html.) For much of the B2B world, however, words are cheap. Action speaks louder. Well, there have been indications—right here in our own “electrical” space—that B2B e-commerce is much more than alive. And they’ve come from unexpected places. The manufacturers’ nightmare During the 1998-2000 hysteria, top executives of electrical manufacturing firms with established distribution in the United States had to choose between shredding their historic distribution chain and using the Internet to go direct to the customer (i.e., you), or keeping their historic distribution chain and remaining vulnerable to someone who was willing to choose the first option. Essentially, the fear was that either a long-time competitor would “go direct” (like Ruud Lighting) or that an offshore company—a Japanese or Chinese electrical giant without broad distribution in the United States—would start marketing here without building a distribution infrastructure. The first case proved to be a phantom, at least in the short run. There was gossip that some electrical suppliers looked into selling direct. Reportedly, several small lighting manufacturers (who were not named) took part in “reverse auctions” on ElectriciansWeb.com. But little happened and ElectriciansWeb.com didn’t succeed. No Web-based, distributor-less e-commerce sales operation materialized from offshore…until the summer of 2001. Invaders from Japan and Italy began to sell without electrical distributors in the United States. There is a big advantage to a manufacturer selling without distribution in place, if it can be made to work. The supplier can take a large portion of what its competitors pay the distributors and cut prices, keeping a small portion and boosting profits. Mitsubishi on Ebay Mitsubishi Electric Automation, Inc. (MEAU), is now selling products on Ebay. What’s more, the company claims the consumer auction site offers “exceptional deals on first-quality automation and motion control products, with all items carrying the manufacturer’s 12-month warranty.” Offered online are variable-frequency drives, UPS units, and programmable logic controllers. The company said it will offer servo motors as well. The items to be auctioned “are simply older models which have been replaced by newer technologies,” according to a spoksperson. (See members.ebay.com/aboutme/ mitsubishiautomation.) Questions include: Is this MEAU’s “stalking horse” for broader sales in the United States of all kinds of other electrical products? Or, is it just the company’s effort to create a market for its surplus materials? Another question might be: Won’t competing U.S. manufacturers be monitoring the Ebay site more closely? SIEI goes direct in United States Societa Industriale Elettrotecnica Italiana (SIEI) is a manufacturer of electrical and industrial automation products, founded in the 1930s. In going direct on these shores, the company has made an investment, stocking a 15,000-square-foot warehouse in North Carolina. They sell circuit breakers, contactors, relays, timers, pressure switches, motor controls, and more. “Elestream” (www.uselestream.com) is the name of the new operation, and SIEI hopes it will become “a full-service provider of power control and electromechanical products.” Bottom line? These ventures, from opposite sides of the globe, were announced in August. It’s not immediately apparent if electrical contractors are included in their target markets. It’s also not clear how quickly SIEI can grow from a 15,000-square-foot warehouse serving a 3,000-mile-wide country; or how rapidly MEAU products can be sold to industrial and contractor customers from a consumer-oriented Web site. However, if either or both ventures succeed, we may see additional ventures from other companies with no U.S. electrical distribution in place. Will that lead a weaker U.S. electrical supplier to abandon its distribution infrastructure (and costs) and go direct as well? Only time will tell. SALIMANDO (firstname.lastname@example.org) is a Vienna, Va.-based freelance writer. He writes a monthly e-commerce column for www.tedmag.com.