3Com opts for channel over own online store

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Nobody hates manufacturer-direct e-commerce sites more than the channel

partners such ventures circumvent. But one of the secrets of the b-to-b e-commerce world is that most manufacturers don’t like selling direct either. Direct online sales are costly, technically complex and a distraction from the core competencies of any product company—creating and delivering better, more profitable goods.

For proof of this, consider networking and electronics giant 3Com Corp. The Santa Clara, Calif.-based vendor started selling select products directly from its Web site in November 1999, ultimately growing online revenue to 5% of total sales. But it wasn’t thrilled with the prospect of selling directly to customers online, said Paul Cegielski, e-business manager for 3Com.

"We did it mainly because we believed our end users wanted to buy from us direct," he said.

Earlier this year, Cegielski fielded a cold call from vendor Channel Intelligence, which had developed a database and e-commerce platform that it said could solve 3Com’s online woes. The vendor’s Channel Buy Links platform lets manufacturers link directly to product pages at reseller sites. Channel Intelligence does all the site-scraping and maintenance to keep those links up to date. Its customers pay a monthly fee to get direct e-commerce links to selected reseller and retail partners with just a few days of development work.

3Com liked what it heard, and in April tested the Channel Intelligence system. As a trial, it implemented the new reseller "buy" links alongside its existing 3Com shopping cart—giving customers the option of buying directly or via an authorized reseller.

Within the first 30 days, more than 50% of online sales originating at the 3Com site finished at a reseller location. A month later, in early June, 3Com shut down its online-direct Web store, relying totally on Channel Intelligence’s platform to send customers off to partner e-commerce sites for more than 125 3Com products.

3Com is delighted with the results. It no longer has to support its own e-commerce shopping cart application. It also shut down the distribution center required to deliver products directly to customers.

"Frankly," Cegielski said, "we can run this new site for one-tenth the cost it took to run it ourselves. That made the decision pretty easy."

Big lead generator

Already, 3Com has generated more than $135 million in incremental leads for dealers. It has shipped more than 15,000 buyers over to its channel partners, who are reporting a sales conversion rate of 8% to 11%, compared with the typical 1% or 2% rate they achieve via other marketing and sales programs, Cegielski said.

One reseller, Insight Enterprises Inc., has doubled its sales volume on 3Com products and converted nearly 10% of the links redirected from the 3Com Web site, said Dino Farfante, president of Insight North America.

The service that Channel Intelligence delivers may, on the surface, seem easy to duplicate. But once a manufacturer tries to create an up-to-date database of links to products at all of its partner reseller Web sites, the complexity and costs quickly ramp up, said Alan Fulmer, president of Channel Intelligence.

"A number of manufacturers have told us, ‘We tried to do that, but it’s really hard. The darn dealers keep changing pages, and sites go out of business. We can’t manage that,’ " Fulmer said.

The company charges on a monthly per-product-listing basis: 25% of the manufacturer’s suggested retail price. So creating a buy link for a $400 DVD player would cost a manufacturer $100 per month.

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