Buying Supplies On Line

In his keynote address at the Vue/Point 2001 conference held last month in Arlington, Va., Professor Frank Romano of the Rochester (N.Y.) Institute of Technology posted gloomy statistics for the glut of e-procurement solutions targeting the printing industry with minor success.

He then brightened the day for certain dot-com entities with the following statement: "On-line buying and selling of paper and supplies makes the most sense of all, and there's no reason not to expect 100% adoption of this part of e-commerce."

Indeed, of all the on-line shopping options geared toward the graphic arts industry, printers seem to be warming the fastest to the idea of buying supplies via the Internet.

According to a recent study conducted by Boston-based industry research group State Street Consultants, 42% of the 201 printers surveyed and 54% of the 197 print buyers and creators polled already purchase supplies and equipment from on-line equipment and supply stores, while 29% of printers surveyed said they had no plans to purchase equipment or supplies via the Web.

The survey pointed out that while printers still prefer their established dealers and equipment vendors, the belief is that these traditional entities must quickly develop aggressive Internet strategies to fend off Web-based distributors.

"Clearly, printers want to buy from the suppliers and dealers they're used to using, and to date much of what they've bought over the Web has been software, office supplies, and computers," reports State Street principal John Zarwan. "But a fair number of them are starting to buy consumables on line. The bottom line is that printers like buying on line—they like the convenience, speed, and financial savings. The only negative issues are that it is impersonal, so they're concerned about not receiving personal service."

Players in the industry's on-line retail sales space now number in the dozens, and include Forest Express, Graphic Arts Supplies, MediaStreet, PaperExchange, Paperhub, PaperLoop, Pitman, Prepress Mall, Printer Alliance, PrintNation, and xpedx.

PrintNation, Irvine, Calif., recognized as the first firm to offer graphic arts equipment and supplies via the Web, made news late last year when it announced a major reorganization, reducing its staff by 47% to bring the total number of employees from 75 down to 40. The struggling Internet store, rumored to be for sale, still claims 3,000 printers as customers, meaning that they have purchased at least once from the site.

"PrintNation's problems last year were less a fact that they are Web-based than that they couldn't differentiate themselves from any other distributor: they weren't able to get major graphic arts products to distribute over the Web," assesses Zarwan. "The site sells $300 Agfa scanners that can be purchased anywhere; it isn't selling Agfa imagesetters, Agfa film, or Agfa plates. This makes it more difficult for PrintNation to attract people, even assuming they want to buy that product without the technical support offered via traditional purchasing avenues."

Veteran graphic arts industry executive David J. Steinhardt—who left his position last year as president of PrintImage International to become vice president of industry relations for PrintNation, then in February returned to an association role to become senior vice president of the Graphic Communications Association, Alexandria, Va.—offers an assessment of the current e-store space.

"The industry is still stuck on this habit of a dealer delivering doughnuts on a Friday," Steinhardt says. "In my opinion, the distribution channel is broken. The profit margins of dealers in general are very tight right now. Besco has gone out of business. There are dealers in Texas that have just closed shop. There is massive consolidation by dealers, and the big four—Heartland, Pitman, Primesource, and xpedx—have grown through acquisition. All of these situations indicate a changing dealer climate."

"The issue is how a product gets delivered in the most efficient, productive way to the end user," Steinhardt continues, pointing out that the traditional distribution model relies on dealers to stock inventory and sell product, whereas the e-commerce solution instead turns "buy to hold to sell" into "sell to source to fulfill."

"What has to be developed is what I call the 'annuities business'—getting supplies on line that people order once or twice a week in order to gain the volume of sales needed to make money," he states. "The fundamental obstacle is making printers feel comfortable with this new purchasing process when in some ways the pain is not enough for them to switch. In other words, it has to be a medicine, not a vitamin, that on-line stores provide in order for printers to make the change."

Among traditional dealers and distributors that have taken steps to embrace the Internet are LDR, Pitman, Primesource, and xpedx, a division of International Paper. Further, recognizing the need for adopting a Web strategy, the North American Graphic Arts Suppliers Association board of directors last year passed a resolution to promote traditional "bricks and mortar" dealers' efforts to become "bricks and clicks" capable.

"One of the key factors about the Internet is that it is much less alluring to go with an unproven commodity than it is to go with a trusted name that you feel comfortable with," reasons graphic arts industry consultant Steven Schnoll. "xpedx.com, for example, has the stability of International Paper behind it. The printer looks at the paper company as the most important piece in its supply chain, so that supplier is a trusted partner that the printer knows will make deliveries correctly, on time, and at a fairly negotiated price. This built-in trust allows xpedx to expand to offer a whole gamut of products to its customers for one-stop shopping over the Internet."

Graphic Arts Supplies represents a land-based catalog supply house now using the Internet to transform the consumable purchasing domain within the printing industry. A little more than a year after going live with its site, the company claims 25% of its total sales volume now comes from Internet purchases, with 100 to 150 new Web site customers (numbering 1,000 at last count) being added each month.

Company president Gary Fisher explains his business's selling proposition. "Not only can we ship companies' product lines nationally, unrestricted by territorial contracts with manufacturers, but we can carry multiple lines of distributors' products," he explains. "Just like when you go into a grocery store and you've got your choice between Pepsi and Coke, we have five different ink lines, 15 different chemistry lines, and 25 software lines. We have multiple trapping and preflight software, so we sell the one that best fits the application for whatever platform a customer is using—not which one looks best in our book because there's more margin in it."

Fisher says thus far shoppers entering his company's site tend to be "technically savvy employees on the prepress end."

"The strength of our model is that we're not a virtual dot-com business; we never were," he concludes. "Because we are a stocking dealer—with a newly added 7,000-square-foot warehouse—managing our own fulfillment and not relying on third-party vendors to drop-ship, when you order 10 products from us, you get one shipment, not five from five different places around the country."