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Distributors help retail latecomers get online

Bricks-and-mortar laggards selling office supplies, PCs, and sporting goods are getting a lift into cyberspace from an unlikely source--their wholesale distributors.

3 min read
Bricks-and-mortar laggards selling office supplies, computers, and sporting goods are getting a lift into cyberspace from an unlikely source--their wholesale distributors.

A year ago, PC distributor Ingram Micro began helping dealers get online, and now the pattern is continuing within the office supplies and sporting goods markets.

Training their sights on the Net, distributors are seeking new services revenue, greater loyalty from their dealers, and a chance to sell more and different kinds of products. They also know that if they don't make a move, online stores may go direct to manufacturers to buy, bypassing the wholesalers altogether.

"Smaller companies need a way to compete with the huge category killers: the larger bricks-and-mortar stores that have gone online and have the resources to do it right," said Varda Lief, senior analyst at Forrester Research.

But distributors are becoming defensive. "Smaller companies can go direct to manufacturers or aggregators; it's no longer 'sell through a distributor or bust,'" Lief added.

Following Ingram's lead, United Stationers, at $4 billion in revenues the largest U.S. distributor of office products, today announced a new venture with Web start-up E-commerce Industries to bring other office supply companies onto the Net.

With a slightly different slant, shoe maker and sporting goods distributor Global Sports last month joined venture capital firm Softbank intending to sell footwear as an e-commerce outsourcing service. To be called Global Sports Interactive, the company has signed six major sporting good chains, including Sports Authority and Athlete's Foot, to set up and maintain their online stores by year's end.

For today's office supply announcement, E-commerce Industries provides the technology from its online storefront OnlineOfficeSupplies.com, while distributor United Stationers pulls together the back-end pieces, shipping boxes overnight directly to the buyers under the name of the Internet office store.

"There has to be an intermediary to pack the boxes," said Paula Jagemann, the OnlineOfficeSupply.com chief executive who also will head the joint venture with United.

Genni Combes, analyst at brokerage Hambrecht & Quist, sees the moves by wholesalers to help land-based retailers get online as part of the larger trend of many players trying to help small businesses get onto the Web. But she, too, sees wholesalers acting in their own interest.

"When Amazon.com buys direct from publishers, it cuts out the wholesale distributor," Combes said. "Amazon is slowly but surely going direct to manufacturers, and it's taking market share from everyone, including the independents. And independents go through distribution."

The oldest wholesaler program to set up online stores is Ingram Micro's, which launched about a year ago. Although Ingram plays down the situation, its dealers are threatened by direct PC sellers such as Dell Computer and Gateway that cut out resellers.

To date, Ingram has 14 resellers up and running, some doing sales off the Web site but others publishing a catalog and toll-free phone number for buyers to call.

That smallish number is intentional, according to Ingram: "We're testing to work out all the kinks," a spokeswoman said. The company expects a new version of the service next month and expects a strong increase in demand, she added.