Are you trading online?

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As India Inc. braces itself for an economic recovery in 2010, distributors, channel partners and importers are trying to find ways to increase their revenue, reduce their dependency on resellers and find ways to improve their operations. In this context, online trading has emerged as an important tool. It provides longer reach, easy accessibility and most importantly increased margins for the manufacturers by saving a lot of cost. As more and more companies today are using online trading to offer direct sales to business-to-business customers, no wonder that both suppliers and customers are increasingly recognising its benefits in terms of cost, control and customer satisfaction. It facilitates customers to obtain information on products, prices, features and check the order status before placing their orders on the website directly. However, channel partners in the Indian electronics space are embracing the online trading concept slowly, as most of them still follow the traditional way or ‘offline’ way of selling products through direct or channel partner model.

By Sandhya Malhotra

Friday, March 11, 2011: Nevertheless, some forward looking channel partners are already relying on the Internet to communicate with their clients. Delhi based GD Saini, managing director of Singodia Electronics, who ventured into online trading in 2010, says, “Internet enables hassle free interaction with our clients directly. It makes the trading process very smooth. However, the concept of online trading has not yet taken off in Indian electronics channel community and only a handful partners are gradually adopting this new model into their businesses. We are confident about the effectiveness of this model and planning to generate 10-15 per cent of our total revenue through online trading by end of this year.”

Acknowledging the benefits of online trading and moving in tandem with times, Radius Industries has also embraced the online concept with both hands. “We are about to roll out our online trading website to offer goods and services to our existing customers. It will help us to tap international business as well,” says RK Asthana, manager, Radius Industries.”

Of late, Singodia has put the inventory of its complete range of electronic components and electronic manufacturing services on its online trading website. “We have automated the customer care department and for any online or offline customer query it will revert back with a reply in 24-48 hours,” informs Saini. Cirkit is another company which is planning to start its online trading venture in 2011.

Benefits of online trading

Customers’ reliance on the Internet for researching and buying consumers electronics products, etc, through Web online portals like eBay is increasing. “This success can be repeated in electronics space as well,” says Amit Kumar, proprietor, SK Metals, who has been into online trading for the last seven years and generating 80 per cent of his sales through the Internet.

SK Metals sells sheet metal cabinets, plastic moulded front for panel inverters, CFL inverters, online and offline UPS, voltage stabilisers battery trolleys, etc, online. Besides products, the company offers SMS service to its national and international customers, online material tracking and discount services, etc. Channel partners are critical for the success of a principal company. But they may not have the capacity or customer demand to stock all the products and spare parts all the time, nor can they be available to every customer on demand. Online trading can overcome these barriers effectively. It enables them to serve all their customers at the same time, if needed. Geographic barriers, order time and channel partner’s availability seizes to hamper business if carried online. Online orders can be placed at any time and depending upon the urgency of delivery can be routed to a distribution centre or nearest channel partner to make the delivery in a matter of few hours. “Online trading allows you to maximise your revenue stream while redirecting sales and marketing costs to more lucrative ends. Also, channel partners enjoy additional revenues and improved efficiency. It also gives complete control on how products are branded, presented, marketed and sold,” adds Kumar.

Sharing the experience of doing online business of prototype and small series PCBs, Dirk Stans, director, Eurocircuits, says, “ At PCB Power, which is an Indian subsidiary of Eurocircuit BVBA, we ensure user friendly online services with full transparency. The USP of our online service is delivery of products as per the commitment.”

Making online sales rewarding

Saini says, “Online trading provides greater control over the sales process and maintains customer relationship. One can feed local customers more effectively through this medium. It also reduces sales and distribution costs and minimises inventory holding costs if a build-to-order model is used.” Online sales provide precise information on what customers want, so it is essential to tailor the service to meet those requirements and make online buying a rewarding experience,” says Kumar.

Online trading is a continuous job and it needs to be coupled with real time services, for example, providing business customers with personalised Web pages that include access to their own product configurations, automated, paperless orders, order tracking, asset management facilities and individual support tools. “Customers recognise the value of these services, which in turn, strengthens customer relationship and provides direct sales operation an edge in the market, adds Saini.

Improved payment cycles

According to Kumar, online sales improve the cash flow of channel partners immensely. “Since we release products after getting payment, it serves us great,” he adds. Online trading also effectively tackles issues like payment delays and defaults because for online sales, payment terms are reduced to zero days. Moreover, online ordering greatly reduces order procurement time, which in turn, enables channel partners to focus more on value added customer services and prospecting.

Apprehensions over online trading

Despite the fact that Internet can act as a level playing field for exporters, electronics exporters and channel partners are still uncertain about how the Internet in general and e-commerce in particular can enhance their business. There are apprehensions on the genuineness of the prospective buyers as they are physically unknown to them.

Jaipur based Neelesh Saxena, proprietor, Hitech Systems Ltd, a distributor of electronics and security products, says, “Companies from different countries are inquiring about our products, but we are uncertain whether to do business with them or not. We are unable to find out their competency, both technical as well as financial.”

Echoing same sentiments, Gulab Chand Hariya, director, Cirkit Electro Components, says, “Online trading poses many risks and distributors have not yet experimented with this new concept. We too feel that it may help in price cutting and address the price disparity issue, but before going online one should do thorough research on its pros and cons.

There are many products such as capacitors that are tested by buyers before they make the purchasing decision. 3D pictures of products along with their specifications can be provided on the Internet, but there is no way that customers can test products for their performance online.

The buyers of products such as SMT machines and reflow ovens need to use them before making the purchasing decision. In this scenario, the dealer plays an important role by demonstrating the products. “Not all products can be purchased online as they have to be tested for their quality and performance before buying and it is not possible for manufacturers to provide demonstration for every product. Only a dealer can take care of this issue,” says Naveen Goel, managing director, Insel Rectifier. Also, since small components like resistors and capacitors are the building blocks of many bigger products, to ensure their quality and performance is very critical for buyers.

Cost of operation of online business

Setting up online business is a costly and recurring affair. A full time technical person is needed to manage it and the architecture of the site needs to be built. An appealing look of the website must be designed, while the content needs to be written and updated from time to time. Any additional tool such as online forms, shopping carts, product samples, audio video clips also need to be added to the website.  “We had invested Rs 75,000 in setting up the online business. Besides money, other challnges are offering online services to the customers as per their needs and quality products as per their satisfaction,” says Kumar.

Precautions need to be taken

Channel partners who want to sell directly through online trading, there are some major challenges to think through. Firstly, it is important to have a strategic plan to tap the opportunities. In order to maximise the potential of selling online, a channel partner needs to establish good creditability in the market. He should have a strong understanding of returns, stock control, promotions, fulfilment, delivery charges, distance selling and fool proof mechanism of accepting payments online. “It is also essential to understand the cost and risks involved in going online and measure the expected returns on investments,” says Saini.

Internet has emerged as a powerful media, but it has to be used strategically in order to draw benefits. A company may opt to be listed on various search engines for electronic companies such as www.eleb2b.com (a search engine dedicated to just electronic companies), etc. These sites provide enough visibility to the listed companies.

Benefits of trading online

• Creates a new revenue stream and channel to market

• Increases margins and take control of the price point of products

• Reduces dependency on resellers

• Exploits online revenue

• Takes control of the brand

• Takes control of promotional activities and taps opportunities to up-sell and cross-sell

• Improves cash flow

• Gets orders 24×7

• Increases order accuracy

• Reduces handling, loss, theft, damage and insurance cost

Channel partners and principals doing online business

Company doing online business Products sold online Revenue earned online Online tracking of order, SMS facility
SK Metals Sheet metal cabinets and plastic moulded front for panel inverters, CFL inverters, online and offline UPS, voltage stabilisers, battery trollies, etc 80 per cent Online tracking of order, SMS facility
Singodia Electronics Pvt Ltd Electronic components 10 per cent (expected in 2010) 24X7 customer care department for any customer related query
RS Components & Controls(India) Ltd Electronic components, power electronics, electrical, automation and cables, mechanical products and tools, IT test and safety equipment 10 per cent Order form, order option, order review, order confirmation
Radius Industries Audio, video and telecom accessories Soon to start
PCB Power Prototype and small series PCBs 100 per cent
Online customer administration and low cost of administration with full transparency

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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