--OT--- IBD article: Internet Now Intertwined With Non-Tech Industries
this article reinforces the point I made last night in post #1074 about the need to get traditional companies using the internet for more profitability
Date: 3/24/99
Author: Pete Barlas
CB Richard Ellis Inc. deals with bricks, mortar and dirt - stuff you can feel with your hands. But the world's largest real estate brokerage says the key to its fortunes is . . . cyberspace.
In the next few months, CB Richard Ellis will consolidate 300 company Web sites into one. It aims to provide a one-stop information shop for customers. The site will give clients data on such things as utility costs, property appraisals and vacancy and absorption rates.
CB is jumping on the Web because it must, in its drive to be its industry's preeminent services firm, says Joe Fitzpatrick, executive vice president of worldwide communications for CB.
''The Web offers a tremendous opportunity to do that,'' he said.
CB isn't the only non-tech company discovering that today's business model must include the Net.
Those moving fast to grab some Net-pertise include Dow Chemical Co., Boehringer Ingelheim Pharmaceuticals Inc., Providian Financial Corp., General Electric Co. and steel maker LTV Corp.
They're using the Web to buy and sell products and communicate better with customers. Why? Because the number of Internet users is expected to reach 328.5 million in 2002, up from 142.9 million this year, says researcher International Data Corp. in Framingham, Mass.
The value of goods and services bought over the Web will jump to $425.7 billion by 2002 from $67.1 billion last year, says IDC.
Companies can't ignore those numbers, says Mark Tebbe, chief executive of Chicago consulting firm Lante Corp.
''The Web lets commerce and information flow much more freely,'' he said. ''Companies know this is no fad.''
Take Dow Chemical. By year end, it will start selling chemicals on the Web, says Richard Payne, Dow's director of electronic commerce.
''Customers are aggressively asking for (electronic commerce),'' he said.
Dow at first will sell only a few chemicals and plastics online, including calcium chloride for de-icing and latex for making coated paper.
But selling chemicals isn't like selling books. Dow will limit sales to large customers that know how to use and store such products.
''We aren't going to ship chemicals to any Tom, Dick or Harry who contacts us over the Internet,'' said Payne.
The steel industry also is becoming welded to the Web.
Late last year, steel-makers LTV, Steel Dynamics Inc. and Weirton Steel Corp. launched a joint Web site company, MetalSite LP . It sells steel products directly to customers via the Web.
MetalSite sells damaged and excess steel now, but it will expand to more types of steel. So far, customers are buying up to $24 million worth of steel a month from the Web site.
Some analysts say it's unwise for three rivals to join forces on one Web site. But steel buyers want the convenience of one-stop shopping, says MetalSite Chief Executive Patrick Stewart.
''One (Web) site creates efficiencies in the marketplace, and isn't that what everyone is looking for?'' he said.
Providian hopes so.
The company, which provides loans and credit cards to more than 8 million customers, is building its own one-stop shop on the Web.
The company boosted its Web operations by buying GetSmart.com Inc., a Web-based referral service for consumers shopping for mortgage loans, and Web Card, a company that issues credit cards on the Web.
Providian believes more customers will prefer to handle the bulk of their financial tasks over the Web, says Senior Vice President James Rowe.
''The Web is about continuing to evolve with your customers, and your customers' changing lifestyles,'' he said. ''The Internet is clearly a revolution.''
More non-tech companies also are using the Internet to improve internal operations.
Boehringer, for example, is developing a system to buy all of its supplies not used in manufacturing directly from vendors via the Web.
The company buys about $230 million in such materials a year. Today, it can buy up to 250,000 products online directly from suppliers. By midyear, that number will double.
Then, the company's purchasing department will no longer have to worry about processing $50 supply orders, says Boehringer Chief Financial Officer Holger Huels.
''We want our purchasing department to negotiate deals with suppliers, instead of pushing papers around,'' he said.
General Electric has developed supply purchasing programs for eight of its divisions to save money and speed product requests. By next year, General Electric plans to buy up to $5 billion in non-manufacturing products a year from suppliers on the Web.
The Web business model, though, is more troublesome for certain industries.
Eli Lilly & Co., for example, provides health and product information on the Web. But it has no plans to sell products there, says Maura Kahn, a company brand manager. It sells mostly through wholesalers.
Analysts say companies in the pharmaceutical, auto and some other industries haven't started selling products online because of conflicts with the traditional sellers of its products - wholesalers, dealers and resellers.
But companies should resolve those problems as the Web audience grows, says Matt Roche, president of Fort Point Partners, a San Francisco-based consulting firm.
''You can't pretend the world is flat anymore,'' he said.
That doesn't mean that integrating the Net is easy. Union Carbide Corp., for example, is just starting to explore Web sales. For now, its site provides health, safety and environmental information.
Goodyear Tire & Rubber Co. also has mulled selling products on the Web. But it's not ready yet, says Laura Casenhiser, Goodyear's Web-content coordinator.
''If we shipped directly to customers, the tires would arrive in four big boxes - and then customers would still have the problem of getting them mounted. I don't know how we would do it,'' she said.
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