Tuesday, November 2, 2010

New plans for B2B improvements will add value for the distributor and retailer

Mitchell Dancik talks about new developments in B2B:
I recently returned from the annual flooring industry B2B meeting held by the Floor Covering Business to Business Association.  I’m excited to tell you about the new plans to improve B2B for distributors and retailers of hard surface flooring. These new enhancements will make hard surface distributor catalogs “SKU based” and far more useful to retailers than ever before.

If all parties (software companies and flooring suppliers) deliver on this year’s commitments, retailers will be able to receive a catalog where every SKU can have its own prices, specifications, drop dates, etc. Each SKU will still transmit within its associated style or product line, but SKUs can be re-grouped however the retailer sees fit. This will also improve the value that local distributors bring to their retailers.

Amidst the tight budgets of this moribund economy the meeting was the most well attended B2B meeting ever. But sadly the industry segment that might have the most to gain from B2B, the distributor, was underrepresented. To be fair, there were some distributors present, including Oho Valley Flooring, a consistent advocate of B2B through the years. However, distributors were far outnumbered by manufacturers and software companies. Even the retailers (who rarely attend these meetings even though the B2B movement started specifically to attract them) were present and had their voices heard this year.   Distributors have reasons to be a bit skeptical of the B2B movement. Flooring B2B was started by large mills that bypass distributors with most of their products. The initial B2B programs were designed for, and worked much better for carpet than for hard surface materials.  However, things have changed, and there’s real opportunity for distributors to win big with the latest B2B technology.

Hard surface manufacturers make their point
This year the hard surface manufacturers voiced their concerns emphatically, and officially got their agenda voted in. At my company, Dancik International, we have campaigned for B2B improvements for years and with the help of several hard-surface manufacturers, including Armstrong World Industries and Dal-Tile, these changes are coming. We agreed that a “SKU based” structure was necessary if hard surface products were ever going to be mastered by B2B software.

The problem we have to solve

B2B was originally designed for carpet so item catalogs operated on the assumption that all products could be broken down into “styles” and “colors”, which is how carpet has been sold for decades. This never worked for hard surface products which are “Stock Keeping Unit (SKU) based,” meaning that each item can be unique, with many properties other than style and color, i.e., size, shape, and grade.

The solution we need

Pricing, promotions, packaging and status (such as active versus discontinued) must be transmittable for each item (SKU), and not just at the “Style” level that was previously the standard for carpet. Software that was designed for carpet often sees the style as the product and product prices and specifications are stored with the style. The actual SKUs (referred to as colors) are stored as a secondary table of choices. SKU-based software (which incidentally is the norm in most other home décor industries, and the basis for the UPC numbering system) is designed in a completely opposite fashion, with each SKU (or color) able to have its own prices, specifications, drop dates, etc.

If retailers can receive hard surface catalogs tomorrow that make as much sense as the carpet catalogs do today, they can finally start placing B2B orders for hard surface, which will benefit distributors as much as retailers.  

Why is a workable hard surface catalog so important for distributors?
When I visit with retailers at various trade shows and distributor-sponsored events, they tell me that above all else they want B2B to answer these three questions:

1.    What’s the price of this product?
2.    Do you have it in stock?
3.    What trim, accessories, and installation materials go with this product, and what’s the price and inventory availability of those related items?       

The B2B enhancements that I describe above, combined with the other fine work being done in the B2B community, will allow distributors to answer those three questions instantly and completely. Furthermore, unless those questions can be answered, retailers and distributors may never take the next step of automating back-end processes such as ordering, receiving, and invoicing.

What is the unique opportunity for distributors?
Retailers consistently offer up this quote: 
"I may buy greater dollar volume from the large carpet mills, but I buy more line items from my local distributor.”
•    By activating B2B, distributors can sell more line items and offer more operational savings to their retailers -  more  than any other supplier  -  and this means retailers will actually have more to gain by enacting B2B with their distributors than with any other supplier.

•    If the industry honors the changes that were agreed to at this year’s B2B meeting, distributors will be able to attract more retailers to their B2B programs.

•    If distributors take advantage of this opportunity, they can secure and gain market share. If they do not, they are inviting other suppliers to fill that gap in hard surface automation.

•    Distributors have the extra benefit of being able to use B2B in both directions – to their customers, and from their suppliers.  

What’s in store for B2B and why is it important?
In my next post on this site I will describe the challenges and benefits of the new real-time B2B that the industry pledged to deliver in the upcoming year and I would love to receive your comments and feedback to this post, especially from people who would like to get involved in B2B, and from distributors who need more information.  Thank you for reading.

Mitch

This is post two in a series of posts by Mitch Dancik on B2B in floor Covering. Read his first post on "What's wrong with B2B in floor covering".
      
Mitchell Dancik is president of Dancik International and a consultant for the Floor Covering Institute.

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