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How Much Are Small-to-Midsized Distributors Losing When They Ignore eCommerce?
Posted on September 24, 2009 by Cheyne Rood

No business owner wants to spend resources without the right return on investment. For electronic component distributors, the benefits of eCommerce must outweigh the costs. In previous newsletters I've written about important aspects of eCommerce, but this newsletter is about results: The experience of our DistiSuite clients, small-to-midsized electronic component distributors. I will break down some statistics for your consideration. The numbers may surprise you.

First, some notes about the industry in general. Industry magazines and conferences are eager to talk about the increasing role of eCommerce in the marketplace, and many larger companies have dedicated entire departments to handling their eCommerce website and strategy. Where does this leave the businesses without resources to create an "eCommerce staff"? Where does this leave the small-to-midsized distributor?

Because of its apparent cost and complexity, many smaller EDs have avoided eCommerce altogether. Some believe eCommerce to be contradictory to their unique strengths -- particularly, long-term customer relationships. This is a mistake. Would it make sense to never use email because phone calls are more personal? Of course not - a sales website is simply another way to communicate with customers, and to provide the service and information they expect. With a solution like DistiSuite finally in the mix, the real question becomes - How much revenue does your business lose by ignoring eCommerce?

Let's look at some numbers. Our DistiSuite system costs a certain fixed amount to install, and then an ongoing monthly rate. Because of this installation cost, the total costs for the first year would be higher than subsequent years where only the monthly rate applies. For our top 25% performing clients, here are the statistics:

  • Non-installation year, where clients are only paying their monthly rate:
    • Revenue-to-cost ratio: 91 to 1
    • In other words, these clients averaged $91 of revenue for every $1 spent on DistiSuite annually.
  • Including installation cost this year:
    • Revenue-to-cost ratio: 21 to 1

Because some revenue opportunities occur outside our system, there are likely even more revenues generated via DistiSuite. Our top performing clients average over 400 new web-registered customers every year. Those new customers may start with small orders on the web, but as that business relationship develops may begin calling our client direct with larger volume orders.

What about our bottom 25% performing clients? These are the clients who typically have been with us at DistiSuite a shorter period of time, perhaps wanted to integrate just our inventory management and shopping system into their existing website (cutting out our search-engine friendly infrastructure), and foregoing any search engine marketing. The numbers are still great:

  • Non-installation year, where clients are only paying their monthly rate:
    • Revenue-to-cost ratio: 20 to 1
  • Including installation cost this year:
    • Revenue-to-cost ratio: 7 to 1

The average client in our bottom 25% of performance has only been with us at DistiSuite for 9 months. Although these numbers are certainly respectable, the difference with our top performers shows why we advocate search engine marketing. Most electronic component distributors take simple steps to work with us and optimize their search engine traffic, and are happy with how markedly it impacts their bottom line.

Because every business is unique, and there are so many factors involved, we of course cannot guarantee results. It is clear, however, that eCommerce is increasingly important in this market. Online sales in this industry will only continue to grow, and provide new opportunities for revenue streams and customer relationships. We at DistiSuite have focused on this sector because we know how valuable and important eCommerce can be for small- to-midsized distributors, and we welcome you to contact us to discuss the specific needs of your business.

Notes: The statistics presented above are based on DistiSuite pricing as of August 2008.
Because every client is unique and many factors can affect results , these statistics merely describe trends among existing DistiSuite clients, and in no way guarantee similar performance.

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It's been about six months since Distisuite 're-tooled' our website, and I must say, the results have exceeded our expectations.
- Ed Morris
The DistiSuite team has been extremely responsive and their solution has allowed us to begin selling on the web in a very short time.
- Jeff Meyer