Scott Benfield, president,
Benfield Consulting

Consumer-focused technology platform firms like Airbnb and Uber use an app to match an existing customer need with the available capacity in someone’s house or car. The goal of the platform is to increase traffic across the network and thereby increase sales volume.

The structure of this kind of platform is different from that of, say, a distribution firm that holds the industry asset and makes the product locally available to customers. For the Airbnbs and Ubers of the world, they let other folks hold the asset and the excess capacity. The assets do not weigh on their balance sheets as they do for a traditional supply chain firm. But such business-to-consumer firms and their app-based platforms are addressing needs that are very different from those of B2B online customers.

B2B customers often need help with a product installation or with operating a critical software application. Trouble-shooting the problem requires in-depth knowledge and specialized products with exacting performance characteristics. For example, the average number of attributes for online B2B SKUs is, typically, three to four dozen, quite different from the number of variations in an Uber order.

B2B product applications can be critical in time and financial terms. A waiting production line or flooding apartment complex in want of a crucial part costing just $25 or less, can cost tens to hundreds of thousands of dollars in lost profit or damage; a bad night at an Airbnb is some lost sleep. Hence, we don’t associate B2C platforms with B2B markets. Instead, we point to growing evidence that segmented commerce platforms, or thin slices of B2B markets, can serve as online marketing platforms for reaching important segments of customers. Often using the back-office functionality of their full-service parents, these segmented operations can attract new business and new customers quickly and profitably.

A thin slice of a market segment is evidenced in Zoro Inc., also known as Zoro Tools. The site (www.zoro.com) was launched in 2011 by W.W. Grainger Inc., a major distributor of business and industrial products. Zoro solicits smaller customers of MRO (maintenance, repair and operations) supplies who want a good price, easy-to-navigate site, and good delivery.

Zoro has grown from 180,000 SKUs initially to “millions” as listed on its website. The thin slice of smaller customers, marketed under a different banner, with competitive prices doesn’t compete with the full-service Grainger. It is unknown to what extent Zoro shares back-office support and I.T. with its parent, but I view Zoro as a segment platform. It is a new model, targeted to a specific customer base, with a trimmed-down profile and competitive prices.

Another platform is Wilmar, a Home Depot entity, at www.wilmar.com. The company, an entity of Interline Brands, was purchased by Home Depot in 2015. It targets MRO supplies in multifamily housing facilities, especially those with in-house maintenance staff.

Most full-service wholesalers in the PHCP vertical (plumbing, heating, cooling, piping) show little evidence of targeting multifamily housing as a separate online entity. A review of the more traditional full-service wholesalers and their online sites finds no segment break-out for replacement supplies for multifamily installations. Often, their e-commerce sites start with a product grouping and leave the customer to navigate the site with common tools.

When this is the case, the online buyer becomes exasperated with moving through the full-service site. A thin-slice segment, however, winnows down unnecessary products, services, and information. The segment definition defines the needs of the target customer and makes the online experience quick and accurate.  When done well segment platforms can outgrow full-service sites by factors of 4x to 5x; often for many years.

The online platform is a thin slice of an existing segment. Often segment definitions are application-based, but both Zoro and Wilmar have multiple segment layers including: application (MRO), installation (multifamily housing), size-based (small business), and customer-type (in-house maintenance professionals). These layers create a unique online marketing mix that gives the customer a customized experience far better than using a full-service site, even one with the latest technology.

Researching valid segment platforms takes exacting work in meeting segment principles of size, access, sustainability, and measurability. The thin-slicing of a segment defines the online customer with respect to products, applications, specific search, relevant content, and application support through video, live chat, or the occasional need for a phone call. Additionally, many MRO customers are the direct installers; online purchasing allows them to order material after hours for later install.

The Future of Segment Platforms

I see a significant future for online platforms in B2B durable goods distribution. Current success in organic online growth of B2B wholesaler-distributors is tepid, at best. Existing automated marketing tools and analytics have not proven to be tremendously effective in B2B markets with their product complexity, timeliness of demand, and application risk.

The practice of thin-slicing a segment and supporting it with an exacting online marketing mix shows promise and, from all reports, the growth is substantial. Full-service distributors will need to harness the skills of B2B marketers who can develop financially valid thin slices of existing segments and answer customer needs with online marketing tools.

Today’s one-size-fits-all online efforts, led by product definitions on the homepage, won’t cut it. A product lead-in is not a marketing definition that customers can identify with. The marketing wisdom of yesteryear applies here: Customers who want to join two dissimilar materials don’t necessarily want screws and drill bits. They would prefer to review the options for fasteners and making holes.

(This is the second of a tw0-part series. Read the first part here.)

Scott Benfield is principal of Benfield Consulting of Chicago, a firm working in B2B marketing for distribution and manufacturing firms. Scott can be reached at (630) 428-9311 or [email protected].