ARN: When did Office National first look into using the Internet as a sales and distribution tool?
Harman: Office National came about after the merger of three Office and IT buying groups, APT, Office Network and Office Force, in July 1999. We are now a network of 130 franchises owned by its members, the franchise holders. At the time of the merger, OfficeForce had already been investigating a trading platform called Tradehub, which was developed by Australian Business Limited, formerly the NSW Chamber of Manufacturers. So we inherited it as of day one as Office National.
How does the trading platform work?
Basically it is a site with a front-end that has the look and feel of Office National, where our clients can purchase from our electronic catalogue. We pay Tradehub a monthly access fee plus a percentage of our online sales to run the site and handle the transactions.
It was only this year we finalised an end-to-end system. Previously we had the electronic catalogue up, but the orders were coming in via fax and e-mail. Now we've written the software so that we can interface our accounting system with our larger clients' accounting systems, so there's no re-entering of information.
Why did you choose this type of platform?
For us the key was low cost of entry for everyone involved. It's really just another tool in gaining another order, so the client can transact with us any way they want.
Do you ever consider joining one of the big horizontal trading hubs? Do you ever fear being left behind?
When I started seeing the take-up rates of online purchasing this time last year, I had a lot of sleepless nights. We've learnt since then that take-up rates are not nearly as high among SMEs, which make up most of our customers as they are part of the corporates. This is probably because the guy in the corporation has an edict from management telling him that's the way they have to do it, but the SME doesn't have that pressure. They go wherever they get good service.
We were originally called in on Cyberlynx for example, but we think they still have a lot to figure out internally. I don't see Lion Nathan, the Commonwealth Bank and Woolworths all wanting to buy the exact same notebook computer. These companies buy all kinds of different products. And for any supplier to take on even one of those multi-nationals sucks a huge amount of resources. To take on all of them, you'd have to be sizeable. I fear for any single manufacturer who tries to take on all of the business of a consortium of that size. I've seen a lot of major manufacturers walking away from big corporate accounts because they couldn't make a dollar. You have to make sure you've made a profit at the end of the day.
Why would it be easier to make profits from a group of SMEs than a large corporate client?
Unlike corporates, SMEs understand the value we have to offer, the advice and service. SMEs are prepared to pay a premium for a value-added service. Corporations normally have their own IT departments so all they want is the best price. They don't need services or integration.
Value-added services will always win over best price. What we've seen in recent years is all the price-point guys, from Edge right back to Osborne, go down. It's because you can't eat growth and turnover, you can only eat profits. With Office National, the customer realises they can buy with confidence and have support at the end of the day.
Have you ever considered using the trading exchange as a means of procuring as well as selling?
We are talking to our suppliers, but they are varied. They range from IT suppliers to office product suppliers to business equipment suppliers - they all have their own systems and the whole thing needs standardisation before we'll go full throttle on it. If there's value and reduction in costs we'll do it, but we won't do it just for the sake of doing it. We'll keep a close eye, but it's not as though we're being bombarded with clients and suppliers that want to do all of their ordering online. Like everything, you outsource what is logical to outsource.