Interview with Georg Gayer

on the future of B2B mail order
(March 2004)

Intelligent marketing, customised solutions, electronic ordering, perfect service – the B2B mail order business model is not only profitable and stable but also innovative and future-oriented.

Georg Gayer, Chairman of the Management Board of TAKKT AG, outlines the opportunities awaiting TAKKT AG in the coming years as it continues to improve its system business.

Question: What will be the future trends in the B2B mail order sector?

Gayer: The rapid advances in information technology will have a strong impact. For instance, customer and product data, which are of particular importance for our activities, can be made available and exchanged ever faster and more comprehensively. At the same time, we have access to new, very powerful marketing, sales and logistics tools.

Question: Can you give us a few examples?

Gayer: Let me address two points. So-called individualised marketing, where selected customers are specifically addressed by their names, is an important trend. In this area, new software and printing technologies such as print-on-demand will make it possible to integrate customer data and advertising materials much more effectively than in the past. This way, we enhance the direct customer approach and, hence, the effectiveness of our advertising materials.

Automation of the process chain is another trend. A typical order involves 19 different steps, from order-taking to the review of the credit standing and final payment.

Our near term objective is to automate the processes for a large number of orders in order to become even better and more efficient.

Question: Will the catalogue remain the No. 1 advertising material?

Gayer: Absolutely. A comprehensive, carefully designed catalogue is the best tool to target a customer and encourage them to place an order. The catalogue illustrates our expertise in a way that cannot yet be matched by a website. The physical presence also plays a role in this context – similar to a book. You can touch a catalogue, leaf through it and see the products well structured on a double page. A thick catalogue tells the reader at a glance that the product range is very comprehensive. With a website – as well designed as it may be – you have to scroll and click to find it out. What is more, the catalogue is a classical push medium that has a clear advantage over a pull medium such as the Internet. The Internet will therefore be unable to replace the catalogue in the foreseeable future.

Question: So what role will the Internet play for the B2B mail order sector?

Gayer: The Internet will gain in importance as an ordering channel and an additional source of information. Customers expect high service quality – they want to order and pay for the products as quickly and conveniently as possible. These requirements are met by the Internet. The available product range can be seen at any time throughout the world. Customers can order the desired products online and pay by credit card, for instance. For us, the Internet is an ideal distribution channel as it allows us to make comprehensive product information available to our customers at low cost.

Question: So the Internet will account for a growing percentage of the total turnover?

Gayer: Yes. Today already, more than five percent of TAKKT’s turnover is generated online, with some companies even reporting a share clearly in excess of ten percent. We expect this percentage to double in the coming years.

The situation is similar with regard to e-procurement. In this case, we produce online catalogues for renowned companies and corporations that are tailored to their specific requirements and integrate them into their IT systems. This approach pays off for both parties. Customers can place their orders more conveniently, quickly and cost-efficiently, while we increase customer retention and sales volumes. Over 120 e-procurement projects in Europe alone mean that TAKKT is the industry leader in this area.

The growing standardisation of information structures and processes, e.g. with electronic product catalogues, will reduce costs even further and provide an additional boost to e-business.

Question: You mentioned customers’ service expectations. What will mail order companies have to keep an eye on in future?

Gayer: We have noticed that customers’ service expectations continue to grow as technological possibilities evolve. And so they should!

Today’s standards include a large selection of high-quality products, value for money, efficient ordering, fast delivery and solid guarantee services. In addition, customers expect services that allow them to focus on their business. These services include, for instance, the installation of the equipment on their premises, swift and efficient after-sales service and long-term availability guarantees. At the same time, there is growing demand for competent advice. Our services range from selecting the products and planning the fittings to ensuring compliance with job safety regulations.

Question: What role does international procurement play for a good price-performance ratio?

Gayer: It is becoming increasingly important. The advantages are easy to see – international procurement means that we have a much larger number of manufacturers to choose from. This way, we benefit from better purchasing terms, which we can pass on to our customers. Asia and Eastern Europe, especially the EU accession countries, are the procurement markets of the future. International procurement has its limits, however, wherever important criteria such as guarantees, quality standards and long-term availability are not met in full. We will not make any compromise here, as good service and top quality are critical in our business.

Question: Stock-keeping is an important factor in the mail order sector. What are the trends in this area?

Gayer: Maintaining stocks is necessary and makes economic sense not only because of the growing internationalisation of our procurement activities. The amounts saved as a result of increased order volumes and international procurement are higher than the additional inventory costs. Also, maintaining stocks helps us to offer a better service as we can perform additional quality controls and deliver products faster. We therefore aim to increase the share of the warehouse business from its current level of approximately 50 percent to roughly 60 percent. With transport logistics becoming increasingly efficient, there will be a trend towards centralised stock-keeping anyway.

Question: We have talked a lot about the advantages of new technologies. Will technological know-how be the critical success factor for the B2B mail order business of the future?

Gayer: This know-how is important but it is not the only skill a company needs to be successful in the B2B mail order sector. Many mail order companies that were established during the Internet boom were perfect in terms of technology. But they quickly disappeared from the market because they were lacking other core competencies. The success of a mail order company hinges on efficient address marketing, high product and service quality and efficient logistics. Last but not least, good brand management and an excellent advice are very important.

Question: Let’s look into the future. Where will TAKKT be ten years from now?

Gayer: Our development in the coming years will be positive. TAKKT generally benefits from the fact that the mail order sector – thanks to its advantages such as efficiency, customer convenience and low labour costs – continues to gain market share from the wholesale and retail sectors. We will make our portfolio even more balanced by adding new products in growth segments, which will help us target new customer groups. The share of products for the services sector will probably clearly outgrow the share of products for the manufacturing sector.

At the same time, our brands will continue to expand into attractive markets. Topdeq, for instance, continues to roll out its business in Europe and will eventually cover the complete US market. Product groups currently sold in the USA will be marketed in Europe. And we will expand our presence in Asia. As we make use of these options, it will be up to us to determine the future pace of growth with stable profit margins.