By now it is cliché to talk about how the Internet has "revolutionized" the purchasing experience for everything from automobiles to books. Researching, comparing prices, and buying online are second nature to most buyers, particularly in many B2C sectors, and yet the B2B market for electronics components is only at the beginning of this evolution.
New entrants to the market are beginning to exploit opportunities in the supply chain to deliver more flexibility and efficiency via e-commerce targeted to engineers and buyers. Online distributors are responding to concerns about counterfeit parts by partnering directly with manufacturers to ensure a secure supply chain and a satisfying purchasing experience. As a result, e-commerce is gaining momentum, and the electronics components industry is embracing its future.
Google (Nasdaq: GOOG) has become a part of everyday life and the primary way we search for and find information. For engineers and buyers, it is also a key first stop to searching for components and obtaining basic product information. High-level keywords such as "processor IC" and "connectors" receive more than 2 million searches a month while specific part number searches (e.g., PAS5001-NM3-LF) or long-tail keywords, such as SCSI Bus Termination ICs, while low in search volume, often originate from searchers further along in their design or buying process.
The following chart illustrates the relative global volume of some of the more common electronic components-related keyword search requests on Google in a recent month, such as "voltage regulators" and "FPGA." This education phase is an important first step on the path to full online purchasing, and it's fueling the rise of a new class of inventory search sites that has emerged to provide more detailed information, such as pricing, availability, and fulfillment lead time.
With the rapidly proliferating number of components being offered, these search sites, such as Datasheets.com and Octopart, provide a breadth of information and an efficient format for locating specific components that cannot be matched by an engineer consulting multiple distributors. The product information on the search sites is updated daily by affiliated distributors. When the desired component is located, the engineer is able to click directly through to the distributor's Website and conclude the purchase. For an engineer in information-gathering mode, these sites fill an important role beyond basic keyword search and are an important conduit to distributor e-commerce sites.
Buyers are welcoming e-commerce as a complement to their personal relationships with distributors. On Websites like Components Direct engineers and buyers can browse by product category, manufacturer, and package type. They can compare features and prices of various components, search by various attributes, and download datasheets. Registered users can also track and manage orders, upload a bill of materials and speak to a customer service agent at any time. Not only are such full-service e-commerce Websites providing users with the information and products they need, they also offer a multi-channel ordering process so buyers can choose to conclude their purchases online or speak to a sales person to negotiate price and delivery times.
Features like these are helping enthusiasm for e-commerce spread throughout the electronics components sector, with some industry sources stating that 50 to 75 percent of new business and nearly half of overall sales are coming from e-commerce platforms, with an anticipation of significant future growth.
Although the Internet has lowered the bar for engineers and buyers to find and source components, it has also reduced the time and cost of creating a "storefront." In less than a day, any company can register a domain, build an e-commerce storefront, and promote itself as a components distributor. Given the growing threat of unauthorized or counterfeit parts, buyers must be extra vigilant in validating the legitimacy of an e-commerce Website. Savvy e-commerce providers recognize this and ensure that their sites are as safe for purchasing authentic parts as are traditional methods. Distributors such as Components Direct have responded to counterfeit concerns by offering 100 percent manufacturer traceability, with stringent requirements for inventory and fulfillment.
Industry certifications are one way e-commerce providers are signaling the quality of their products and operations to purchasing professionals. Legitimate e-commerce providers will ensure that their processes and operations comply with the most stringent industry quality standards such as ISO 9001, ISO 14001, ESD 20:20, and Transported Asset Protection Association (TAPA) certification. Furthermore, leading e-commerce providers must also be able to guarantee same-day shipment of both small lots and high-volume orders, and provide world-class customer service to replace the personal relationships the buyer is accustomed to. Buyers are increasingly becoming convinced that they will not have to sacrifice any of the benefits of their direct relationships when buying from an e-commerce platform that meets their unique needs.
Distributors that offer an enjoyable e-commerce experience -- with guaranteed direct manufacturer traceability, industry recognized quality control certifications, and a convenient, easy-to-use ordering interface -- are more likely to expand their businesses and earn the loyalty of buyers.
No sector has been able to withstand the compelling efficiency and cost-saving benefits of e-commerce, and there is no reason to believe the market for electronics components will be any different. The evolution is well underway, and distributors can leverage this growth by beefing up their online offerings and partnering with inventory search sites to provide product and pricing information.