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The e-Store: A Solution to Shrinking Margins

29 Aug, 2005 By: Robert Helmer imageSource

The e-Store: A Solution to Shrinking Margins

Copier dealers face new
challenges in the coming years. Competition from low price products being sold
by smaller accounts or by online marketing firms will be difficult to combat. In
addition, competition from outside companies selling an expanding array of
products and services into the independent dealers’ existing and potential
client base is continually threatening market share and eroding business
opportunities as well.

To maximize profits and avoid increasing overhead costs, dealers must have a
price/quality alternative to Internet competitors. Specifically, they need to
add multiple product lines at competitive prices without stocking inventory or
adding personnel because the traditional option of purchasing, warehousing and
processing orders for the thousands of SKUs necessary to service fully
integrated document management systems is clearly not a profitable or efficient

In addition, the system integration required to offer ink and toner consumables,
office supplies, office electronics, and computer products is virtually
impossible under the standard parameters of buying the inventory, and then
reselling it.

The Internet is the Answer

More and more potential customers are now using the Internet to search for their
product solutions, comparison shop for price, and purchase online without
visiting a retail store.

In the quest for an answer and to meet the demand, some dealers have expanded
their online presence, joining forces with specific manufacturers to display
their products on a framed website. This solution, however, is very restricted
given that any particular vendor supplies a limited inventory selection.

A practical avenue is to secure a private-label Internet store fully stocked
with ink and toner consumables, printers, computers, electronics, office
supplies, and more. This online solution allows the dealer to “be in the
business” without the capital exposure risk of inventory, software development,
additional employees, or increased overhead costs.

A private-label e-store allows all product lines from multiple vendors to be
loaded into one central database. This eliminates out-linking to alternate sites
and thereby better maintains the integrity of the sales and the customer

The need to create a private-label platform for dealers, stocked with products
from numerous major suppliers across the U.S. has been evident for some time and
is becoming a more critical piece of the puzzle as dealers expand their service
options in search of new profit centers.

Based on dealer market studies to determine the components necessary to blend an
online program with current marketing efforts, seven specific details are

1. The site must be private-labeled with the dealer’s name, logo and design as
the examples below show.

2. Products being sold must be of high quality and from reputable suppliers. For
example: HP,

Lexmark, IBM, Epson, Canon, Panasonic, Samsung, Apple, Brother, Compaq, Toshiba,
Ricoh and

Lanier, just to mention a few.

3. Sales confirmation and packing lists must be branded with the dealers’ names.

4. Dealers must have access to live information on all orders.

5. Dealers must be able to sell their own inventory from their site.

6. Profit margins must be equal to the dealer purchasing and reselling the
merchandise themselves.

7. Dealers should not have to increase their costs in hardware, software or
added employees.

This Internet store concept allows dealers to launch a new lucrative division
simply and easily. Dealers who recognize the necessity of these emerging
software platforms are taking advantage of multiple manufacturers’ inventories
being loaded onto their websites without the traditional risks and costs
associated with buying, stocking, managing, and selling the inventory. They will
realize a new income stream where the gross margin equals the net margin, an
obviously attractive alternative to the diminishing margin trend of the

The cost of acquiring a private-label site of this sort is approximately $5,000,
depending on a dealer’s company size and the feature package they select. Given
an average sales commission rate of 20 percent, the return on investment can be
achieved in approximately one year if only $2,000 per month in net sales are
transacted through the site, which is a very realistic probability.

Dealers who are on the front curve of this new wave will set themselves apart
from the competition and they will, of course, benefit the most down the road.

Robert Helmer is chairman and president of Commerce Science Corporation, the
parent company of Q1 Office (www.Q1office.net)—a company that provides
customized online commerce solutions. His experience spans over 25 years in
sales, vendor relations and business development. To contact Robert, call
404.442.5646 or email, reh@q1office.net.

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