Quit Your Whining And Learn To Deal With It!

Internet sales are here to stay.

By Wally Brant

As the nursery rhyme goes, “All the King's horses and all the King's men couldn't put Humpty together again.” In our case, “Humpty” represents the world of welding supply sales before the Internet came along, ruining gross margin and paving the way for outsiders to invade our markets.

Unfortunately for some, Humpty will never be the same, and a lot of crying and whining certainly won't bring him back. So what do we do next?

Finding Opportunity
My suggestion is to recognize the Internet for what it is: A new and probably permanent “alternative channel” with certain advantages and definite disadvantages. It can be an irritation, or it can be an opportunity. Internet selling is definitely not for every company, but it has already affected all of us to varying degrees.

My company did not invent the Internet. (Al Gore already laid claim to that achievement.) Nor were we the first to sell product over the Internet. We simply made the choice a half-dozen years ago to embrace this technology and explore its potential. To date, I have invested tons of time, testing and money into this entrepreneurial effort, just as any distributor could have done.

Today, Internet selling has the capability to represent as much as 25 percent of my company's total revenue. But does that mean that next year it could be 30 percent, 40 percent the year after, and 60 percent the year after that? I seriously doubt it. For most typical welding supply companies (including mine), it is simply an additional channel, a branch.

So why is the Internet causing so much irritation? Primarily because it permits a company in Indiana to compete for sales in markets as far away as Maine, California and even Brazil. And because of its very nature of selling (via electronic “auctions”), the margins of profit are usually much lower than the captive in-store sales. Furthermore, it provides a vehicle for the customer to research prices from several competitive sources.

Now here's the real source of complaint: Some of these Internet shoppers will print out an Internet price (for a product auctioned on eBay, for example), bring it into your store and expect you to match the price. But before you submit to despair, let's examine some options for all the brick-and-mortar companies.

How Online Sales Differ
Let's compare an Internet sale with a traditional sales transaction. When a customer uses PayPal to purchase a welding machine via the Internet, he will most likely get a UPS or FedEx truck at the end of his driveway delivering a box. Period. Unlike the traditional sale, the purchaser gets no set-up, assembly or instructions. Plus, he paid a shipping cost.

Suppose this customer wanders into your store and wants you to show him how to use his new machine. Would you do that for free without charging for your services? Are your services worth nothing? At the very least, you have a real, live customer who came into your store and who probably needs to buy other supplies!

Now, let us suppose the customer does not purchase the machine over the Internet, but rather prints off the Internet price, brings it to your store and asks if you'll match the price. Why would any distributor ever consider matching the Internet price while tossing in free sales training and assembly? That's crazy! Unless, of course, your sales force is worth nothing. Please read on!

How to Make It Work
Dave Weigel of Oxygen Service Company in St. Paul, Minnesota, is a good friend of mine and a frequent critic of my company's Internet intrusions. That is, until he experienced his own “Internet epiphany.” Dave recently decided to redo the floor of his summer cabin. Knowing the manufacturer and the exact model of the flooring tiles he wanted in his summer cabin, he researched on the Internet and found his product at a rock-bottom price. But preferring to buy it right then, he called a local distributor of this floor tile.

When Dave asked the distributor to match the price, the angry distributor told Dave that his Internet price was “ridiculous” and wouldn't help to pay the distributor's rent or even his electric bill. Dave called a second and a third local distributor and met the same angry, curt reply. Then he called a fourth distributor.

The sales rep agreed over the phone to match the Internet price, confirmed that the tile was in stock, and invited Dave to come in and close the sale. By the time Dave arrived, she had done some Internet research of her own. “Mr. Weigel, like I said on the telephone, I'll match the price. However, if you were to buy it over the Internet, your shipping would add an extra $216 to the package, so in all fairness I've added $216 to the price. Would you agree that this is fair?” Dave had to agree.

The rep then asked, “Mr. Weigel, are you going to lay the tile yourself?” Dave affirmed that he intended to do it himself. She then proceeded to sell Dave the glue, the brushes, the knives and the mixing trays, all at near list price. In the end, the combined profit margin of the entire sale was at an acceptable level for the distributor and still a bargain for Dave.

All this was because Dave walked in with an Internet price that he printed off his computer. Too bad the other three distributors failed to see the opportunity to work face-to-face with a customer who wanted to come into their store and buy their inventory.

Are you one of those three angry distributors whining over lowball Internet prices? Or are you the distributor who recognizes the enormous opportunity to negotiate your sales skills with a real live customer inside your store? Humpty Dumpty will never be the same. But it doesn't mean you can't enjoy a great omelet!