Executive Briefing: Just browsing

 

UK dealer group Superstat has just launched thesupermarketonline.com, an e-commerce initiative designed to enable independent dealers to capture the growing internet browser business.

 

OPIcaught up with the business’s Commercial Director,ChrisArmstrong.

 

After a protracted legal process, UK dealer group Superstat’s TheSupermarketOnline e-commerce initiative went live at the beginning of January.

 

The delay in launching TheSupermarketOnline was due to sorting out contract details of the participating dealers (or regional partners, as they are known) – for example, how to distribute proceeds in the event of a sale – rather than technical issues.

 

"Getting the solicitors to write all-encompassing clauses to cover every eventuality has been somewhat ‘challenging’," admits Commercial Director, Chris Armstrong, but this has finally been accomplished, enabling the launch last week.

 

For those unfamiliar with the project, TheSupermarketOnline is a series of ten websites that geared towards getting independent dealers a share of the online "browser" market, where customers search for items using an internet search engine, usually Google.

 

According to Armstrong, the existing browser market in the UK is polarised between big players such as Staples, Viking and Euroffice, and specialist niche players like SafeShop and ShredderWarehouse. TheSupermarketOnline will compete with both these kinds of businesses which is why there are currently ten sites: theofficesuppliessupermarket.com which will sell all products as well as nine niche sites such as thesafesupermarket.com.

 

"The background to the idea was that the trend towards internet sales will eventually erode existing members’ traditional business," explains Armstrong.

 

"By developing Supermarket our members have the opportunity to compete with the big online players and grow their businesses in a manageable and affordable way."

 

Armstrong is the first to admit that is has not been all plain sailing and that Superstat has lost some members because of the project.

 

"Thankfully, the majority of our dealers think the concept it great, so overall the outcome is very positive," he adds.

 

The name ‘Supermarket’ was selected to gain broad acceptance by the end-customers initiative is trying to attract, explains Armstrong.

 

"Supermarkets are synonymous with big operations that have great prices," he adds. "Also there are many large internet players who use ‘supermarket’ in their domain names so it’s synonymous with successful web operations, such as Money Supermarket, Travel Supermarket, etc."

 

To provide national coverage, the central partner (Superstat) has divided the UK and Ireland into 80 regions, with a regional partner exclusively responsible for servicing orders delivered to its particular region. At the time of launch, 62 of the regions had been allocated a regional partner.

 

One condition is that the regional partner must have its own delivery vehicles, ruling out dealers who work solely on a direct dispatch model.

 

"I’m not saying that carriers are bad, but we think that this model will result in much higher customer service levels," states Armstrong.

 

Armstrong also argues that this makes better business sense for the regional partners.

 

"Dealers are already delivering in their area, so there are no real extra delivery costs involved. Furthermore, every order they deliver is a warm lead. It’s somebody who’s actively buying products in their local area and therefore a potential customer for other products and services."

 

Product delivery is really the only stage where the dealer gets involved in the whole process.

 

The sites are hosted and managed centrally by Superstat, which also processes the orders, receiving the payment, placing the order through the wholesaler and paying the wholesaler.

 

A key role played by the central partner is the marketing of the sites.

 

"The really big difference to existing dealer websites is their ability to be found by browsers," states Chris Armstrong.

 

"You can have the best looking website in the world with the most keenly priced products on it, but if no one finds the site on the web then you won’t sell very much."

 

The idea is that with one group of sites and a central marketing fund focused on search engine optimisation (SEO), there is a much greater chance of success than if 80 dealers were each trying to do their own thing.

 

In fact marketing costs, are the only thing the dealer has to pay for – £7,500 (US$12,217) for the first year and £15,000 per year for subsequent years. This gives a marketing budget of over £450,000 for the first year – enough to "make an impact", according to Armstrong – and a potential budget of £1.2 million from 2011, assuming that all the territories have been taken up.

 

This means that in year one, a dealer with one territory is paying around £600 per month for access to a national marketing campaign and exclusive rights to a territory.

 

"This would get them less than two days a month of an SEO expert and on top of that they would have to implement this advice by changing content, blogs, articles, etc, to help Google to find and rank the site," says Armstrong.

 

Gross profits from sales are split between the central partner (30 percent) and the regional partner (70 percent), with hosting and administrative costs paid centrally out of Superstat’s share.

 

Targets are certainly ambitious – Superstat is looking at sales of £50 million a year generated through the SupermarketOnline sites after three years.

 

As Chris Armstrong points out, this represents just 1 percent of the UK office supplies market; nevertheless, if achieved, this would be a spectacular success.

 

But as Armstrong concluded: "At the end of the day, if we don’t work with our dealers to create the solution and harvest orders from browsers, then the existing players will continue to take the spoils which we’d prefer go to our members."