The online
bottom line:
e-commerce pays

The Internet isn't just for sales.
By using it for purchasing, you
can also lower your costs

by Russ Lynch
Star-Bulletin

Gearing your small business for electronic commerce can open the door to a wealth of opportunities to supply goods and services to the military and other government agencies.

But a little-told side of the e-commerce story is that if a business also uses it to buy, not just to sell, it can have a real positive effect on the bottom line, says Larry Nelson.

His Mililani-based company, Professional Bidders, is one of the biggest in Hawaii in the business of advising, consulting and serving businesses interested in bidding on federal government contracts.

The government's aim is to make it impossible to do business with it any other way.

But Nelson, who has about 800 business clients, says small businesses should look in a different way at commerce over the Internet or by privately linked computer line.

"The biggest advantage -- and I have a hard time getting this across to the clients -- is not just using it for sales. It's using it for purchasing and to lower your own costs."

Many wholesalers give price discounts to those who order electronically, and look even more favorably on those who can pay for their orders electronically, in the system called Electronic Funds Transfer.

"All the real success stories are hooking them up to a manufacturer or distributor," so they can do all their purchasing online, Nelson said.

Another advantage in becoming e-commerce savvy: learning how to keep track of contract-bid opportunities.

But it's not all that easy and there are pitfalls, said Roy Yee, president of Kems Kewalo Ltd. His company is mostly a marine electrical equipment supplier but also sells such items as satellite-linked telephones and global positioning satellite instruments.

Yee has been successful at getting significant federal government orders to supply equipment to military bases in Europe, for example, from suppliers in Asia and vice versa.

But that sort of business is not for the faint-hearted. You have to know just what your costs are and you must know your way around the federal contracting business. His company has sold to the military for years, bidding for repairs to ships' electric motors and so on, so he knows how it all works.

There's another snag. Some suppliers restrict their resellers geographically.

E-commerce also requires a business to be computer savvy, he said. Yee has been selling that way for five years or more, has his own computers and purchased sophisticated bidding software. On top of that he works through a Value Added Network -- VAN -- that automatically watches for bid opportunities for the types of things he sells.

Nelson's business, Professional Bidders, handles that for Yee.

Services like those can be obtained at a variety of levels for a variety of fees.

Another Honolulu e-commerce service provider -- GWE Group Inc., owned by Lloyd Wentworth -- said it is possible to get into the business without your own computer, software and technical know-how. The answer is to let a service bureau such as his or Nelson's do it for you.

Wentworth sees "three evolutions" in e-commerce:

One is to use a service bureau. "You don't need a computer. You don't need to buy the software. You don't have to have someone to operate it." Instead, the small business puts a profile of what it does and what it provides and what opportunities it is seeking. When a military procurement office is looking for something, the bid opportunity goes out all over the world. Companies like his have an automatic tracking system that alerts them to opportunities that might suit the specific needs of their clients. That service might cost the client about $1,250 a year, Wentworth said.

There is a top-end level that requires clients to have computers and some software and to be willing to pay fees for access to the military. That would cost $3,200 up front for software and other requirements, plus $750 a year for the service.

In between it's possible to do some of the work yourself under a package provided by the service bureau, for $495 for the software, a flat fee of $350 a year and $75 a month. The fees include registering the client companies with the federal government as qualified bidders.

"The way it works best is not by forcing people into it," Wentworth said.

But small-business people can be shown the advantages, particularly now that big businesses are increasingly requiring their suppliers to work electronically, he said.

Just one advantage of working that way: "They'll get paid sooner" for goods and services, Wentworth said.

Hector Venegas, who has promoted seminars on e-commerce for the Chamber of Commerce of Hawaii and the local chapter of the National Contract Management Association, said the military branches alone buy about $2 billion worth of goods and services a year in Hawaii and the only way to tap into that market will be by electronic bidding.

E-commerce services Commercial service providers, who can set you up at varying levels, or do the work for you, for a range of fees: Professional Bidders Inc. 94-308 Mekeaupea Place Mililani 96789. Call: 623-1745 Web site: http://www.probidder.com GWE Group Inc. 1245 Young St., Suite 201 Honolulu 96814. Call: 597-1655 For more on e-commerce To find out about doing business with federal government agencies by electronic bidding, contact: Electronic Commerce Resource Center 475 14th St., Oakland, Calif. 94612. Call: 1-888-625-3272 ECRC can put you in touch with military procurement agencies. Check the Oakland region, which covers Hawaii, in the ECRC Web site: http://www.ecrc.ctc.com Business Information & Counseling Center U.S. Small Business Administration 111 Bishop St., Suite 204 Honolulu 96813. Call: 522-8131