Web-based sales of automation products and systems are forecast to grow dramatically from just $247m (£165m) in 1999 to $42bn (£28bn) by the end of 2004, according to a new world-wide study by the ARC Advisory Group.
During this period, European sales are likely to soar from $45.7m (18.5% of the global market) to $1.2bn (29.3% of the market).
`The conservative automation market has begun embracing internet selling in earnest, after lagging behind other commercial markets,’ said ARC senior analyst David Clayton.
Suppliers such a Rockwell, Fisher-Rosemount, Siemens and Honeywell are offering users an internet-based alternative to traditional sales channels for buying many low-end automation products. Now smaller automation suppliers are starting to catch up.
Automation products are typically complex and have been considered hard to sell online, but ARC believes selling on the web is a compelling strategy, particularly at the low end of the market where products are simple and low prices most important.
`As more automation products become easier to use, they will take on commodity status, making web-based sales virtually the only alternative to offer products efficiently,’ said Clayton.
Most of the big automation suppliers offer procurement of maintenance and repair operation services via the web, and have begun adding low-end product procurement to their sites.
In the US, dotcom start-ups like automationdirect.com are offering a commodity distribution strategy, with low prices and quick turnaround. Most of the company’s sales go to original equipment manufacturers, which package equipment into their products and services.
E-trading marketplaces and auction sites set up by independent companies and groups of manufacturers will squeeze supplier margins, forcing them to change the way they work in order to remain competitive.
`Automation suppliers who do not start developing an effective e-business strategy immediately will be hard pressed to survive,’ warned Clayton.
Total automation web sales account for less than 0.25% of total sales today, but are anticipated to reach nearly 30% by 2004. `The driving force will be demand for make-to-order, delivering the right product at the right time to the right customer,’ said Clayton.
Provision of plant services via the web will also account for a significant share of revenue by 2004. The focus of web sales for automation suppliers will change from providing information to providing solutions for the optimisation of the supply chain. Wireless access and personal digital assistants (PDAs) will also play a large role in the automation market.
As trade barriers fall in Europe, ARC points out that the development of large distribution centres serving many countries will encourage automation suppliers to implement web sales. `But a possible inhibiting factor will be the passionate nationalism which still exists in many countries,’ Clayton added.
Web sales outlook for automation products and systems is available from ARC Advisory Group, at: www.arcweb.com
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