Many companies are offering products and services online to small businesses, stressing lower cost and convenience as selling points. But what is the reality behind the claims?
Financial Institutions Consulting (FIC) decided to test the offering by creating a basket of regularly purchased products. We looked at the prices offered as well as the service quality.
One major take-away is that banks serving the small business segment should tread carefully before aligning themselves with a vendor. Some banks are teaming up with their own customers or national players to sell products/services to their small business customers. In many cases, however, the small business itself may be better served by picking and choosing from various vendors rather than relying on any one company.
The e-procurement players
Our first step in developing this survey was to select the comparative vendor group. Our review of the e-procurement world suggests that every week, if not every day, another competitor enters the market.
We found at least 17 competitors focusing on small business and middle market needs. The names range from nationally known off-line competitors such as Staples and Office Depot that specialize in supplying the small business market to other companies that sell products as part of a larger offering (Onvia).
We selected a basket of ten products. The basket included low cost commodities such as scotch tape and binder clips to more expensive products, toner and laser paper. All prices were in effect as of early May. We also looked at various qualitative factors, including the range of products offered, speed of delivery, and the degree of reporting customization available to the buyer.
Three key conclusions came out of our comparison-shopping:
1. The cost range for the same product was dramatic. Some vendors were charging 50 percent or more for the same product. Two examples suffice. Depending on the vendor, the same brand of scotch tape ranged in price from from$1.29 to $2.04. The same brand of laser paper cost from $59.90 to $101.88 per carton.
2. No one vendor was the best. The all-in (tax and shipping included) price for the ten product basket ranged from a low of $223.31 to $367.67, more than a 60 percent difference.
3. Shipping costs have to be evaluated closely. Just as on the consumer side, shipping charges vary dramatically and can impact the attractiveness of a product’s total cost. We found that shipping ranged from being free on all orders to having varied tiers of cost.
Banks offering supplies are typically relying upon other vendors, providing them with access to the bank’s customer base. Our prior customer research indicates that customers do not look to banks as a source of supplies or non-core services such as web hosting. Banks expecting this area to be a significant profit center will likely be disappointed.
Short of establishing an e-procurement sales bot for customers, banks should position the offering of supplies to small businesses as an additional indication of their bank’s commitment to that market and as a demonstration that they will continue to find new ways to serve the customer. Providing convenience and showing commitment need to be stressed. Emphasizing low cost will require continual monitoring and a more active involvement than most banks should be willing to spend on this effort.