E-Commerce Prediction
 

Ingram Micro, Inc. is a $25 billion company which consolidates and distributes technology products through 175,000 retailers around the world. I believe that an e-commerce consolidation model will eventually arise that mimics the current distribution consolidation model set forth by Ingram Micro, Inc. I make my case for this premise below: The diagram presented below depicts a rough idea of how the current tried and proven distribution channel works.

Diagram of the Ingram Distribution Model

There are many benefits to the Ingram Micro, Inc. consolidation and distribution model as follows: Suppliers are able to sell all of their products through 175,000 retailers by dealing with just one company - Ingram Micro. This is an enormous benefit compared to the alternative which would be dealing directly with 175,000 retailers. Ingram Micro has established standardized supply chain technologies linking the retailers with the wholesaler and up through the chain of suppliers. The efficiencies are enormous. No one company could pull it off as all companies everywhere would disagree over the supply chain technologies to be employed. Retailers benefit greatly because they deal directly with only one source for all of their inventory needs compared to the alternative which would dictate that they deal with hundreds, if not thousands of suppliers on an on-going basis. With the Ingram model, retailers need only obtain credit from one organization - Ingram Micro. Further, being able to place all orders with one organization is far more efficient than placing orders with hundreds of different suppliers. Now, let us apply this same distribution model to the Internet and see what happens. The diagram below shows that the basic premise is virtually identical - but there are some important key differences.

Diagram of a Possible Mega Web Catalog Distribution Model

When applied to the web, I call this consolidation and distribution model the "Mega Web Catalog". There are many benefits to Mega Web Catalog consolidation and distribution model, many of them are exactly the same benefits enjoyed by the Ingram consortium of suppliers and retailers; however, there are other key benefits as well.   Under the current system, suppliers who wish to sell their goods online must create their own web catalogs. As a result, they face all the problems associated with publishing a web catalog including building and maintaining the catalog, promoting their web catalog, and submitting their web catalog to the various search engines. Still,  current suppliers face the reality that their web site may rarely be found, because they happen to be just one of thousands of other web stores selling the same product. Under the Mega Web Catalog model, the supplier does not need to create a web presence. The supplier does not need to promote their web presence, the supplier does not need to worry about being found on the web. This is because their product data is sucked right out of their accounting system by the Mega Web Catalog (through synchronization) and electronically distributed to hundreds if not thousands of web portals around the world. Here is an example: Let us assume that Small Potato's, Inc. is a small Michigan-based company that makes tiny, little shoes for babies. The company decides to install Peachtree Complete Accounting software. During installation, the Peachtree set up process asks the user "Do you want to sell your products automatically through the Mega Web Catalog? The company indicates yes, and fills out the appropriate application to become a Mega Web Catalog supplier. As the set up process continues, the company places a check mark in the appropriate box next to every product they wish to sell over the internet through the Mega Web Catalog. Thereafter, at regular intervals, Peachtree pushes the desired product data to a web-based database (in much the same way that the Peachtree Web Accounting solution currently works.) Also at regular intervals, the Mega Web Catalog polls the Small Potato's product database on the web, extracts the product data and pricing, and then synchronizes that updated information to the hundreds or thousands of web portals that have chosen to resell the Small Potato's shoe line. One such portal may be Amazon which marks up the Small Potato's shoe line by 20%, and resells those shoes through the Amazon web store. As Amazon accepts orders, they are channeled back through the system where the orders automatically appear in Small Potato's Peachtree Accounting system. In other words, simply by setting up their products in their Peachtree Software system, Small Potato's products are automatically sold through the Amazon portal, and hundreds, if not thousands, of other portals.  In this example, everyone is happy: Small Potato's is happy because this solution allows their products to potentially be sold automatically through thousands of portals. Amazon is happy because they just made 20% profit on the sale of an item which is drop shipped from the Small Potato's warehouse. Amazon never even touched the item or incurred a single cost directly related to the item. Sure, Amazon runs the risk that Small Potato's will not deliver, but that is another problem which can be easily mitigated in much the same way that the seller's reputation is  profiled on Ebay. If Small Potato's runs into delivery problems, then the Mega Web Catalog captures and reports those problems. If those problems are severe, Amazon and other portals simply drop the Small Potato's product line.  The Mega Web Catalog folks are happy because they add a small percentage to each transaction as orders flow through the system. For example, Amazon sells a pair of Small Potato's Small Fry shoes to a customer for $24.00. Amazon keeps the $4.00 profit, and sends the $20 to the Mega Web Catalog company There, the Mega Web Catalog company takes out 40 cents, and passes the remaining $19.60 on to Small Potato's. The Peachtree folks are happy because their accounting system instantly ties in all users to the Mega Web Catalog, and everybody around the globe scrambles to purchase and install the Peachtree Accounting Software system. To be sure, there are key problems that need to be overcome. However, I personally see relatively easy solutions to all of these problems. Consider: The technology is already here. The Oracle, Microsoft SQL Server, or IBM databases will handle this mega web database just fine. The Peachtree Accounting system already pushes out a complete copy of its database to the web at regularly scheduled intervals. Elaborate electronic supply chains have been set up with Wal-Mart and the automobile industry for more than a decade - and they are well proven. The web portals are already set up and selling goods and services as you read this. Synchronization is used by millions of companies and individuals each day - this technology works now. Encryption and security measures have been widely deployed within the financial services arena, and they are working well. To fully grasp the model, you must picture in your mind that the Peachtree accounting system (and other accounting systems of course) will contain numerous new data fields that will feed into the Mega Web Database. Pictures, diagrams, schematics, blueprints, VRMLs, detailed descriptions, hyperlinks to detailed web pages, quantities, pricing, volume pricing, locations, quantities by location, endorsements, case studies, reference lists, etc. will all be maintained by the system and passed along through the Mega Web Catalog to the various web portals. This will allow the portals to sell products with unprecedented levels of product information. Further the portals could use this information to solve many potential problems. For example, suppose the supplier's quantities on hand drop below a certain level or that the supplier's satisfaction ranking falls below a certain level. In either case, the Amazon portal could instantly and automatically eliminate the product from it's web store until such time as the quantities or rankings return to acceptable levels. Its is just a "what if" statement in the SQL query - it's no big deal.  I believe that this is a natural business solution that will evolve. We already have the necessary technology. All we need now are a few people with grand vision, a strong company backing this plan, and about $50 million in seed money. Microsoft is a strong candidate to pull this off. Oracle could certainly do it, they already own the technology to do this. Unfortunately, I believe that the folks at Oracle would be too consumed with the politics of avoiding the creation of a solution that integrates with the current Microsoft technology that their version of this solution would never get off the ground. Ingram Micro could do this, but they may be blinded in much the same way that the train companies thought they were in the train business rather than the transportation business back in the early part of the last century. IBM could certainly do this, however IBM seems to consider themselves to be in the hardware business - many of their non hardware initiatives fall flat. I believe that Hewlett Packard could be a company with the resources and vision to pull this off. America Express could do this, especially through their small business initiative. Heck, I could do this - does anyone out there have $50 million that they could loan me? I'll pay it back - I promise!

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