(Bloomberg) Hill & Markes Inc., a 112-year-old janitorial and food service supplier, is as old school as old school gets. Several of its field salespeople have visited customers for 35 years, and until December 2016 its rudimentary e-commerce site lacked even photos of many of its products. Taking orders on a mobile app wasn’t in the lexicon.
These days, though, this upstate New York company and its 50-person sales team are forging deeper into online commerce and looking to use more e-commerce-aided sales as field reps retire. The automation wave that has displaced so many workers in manufacturing and data entry is hitting the nation’s sales force, particularly among business-to-business salespeople who sell to commercial customers.
“At some point, when the client falls in love with the web portal and the company starts using algorithms to cross-sell and upsell, pretty soon that salesperson is not doing much,” says Andy Hoar, a former Forrester Research analyst who now runs a consulting firm, Paradigm B2B, in Chicago. Hoar has also formed a partnership with B2BecNews publisher Vertical Web Media to produce B2B Next, an annual conference and exhibition that will debut Sept. 24-26 in Chicago and feature presentations on trends in B2B e-commerce by Hill & Markes and other companies. He says customers’ preference for online purchasing has only increased in the past three years since he predicted that as many as a million B2B salespeople could be cut by 2020.
Software companies have been reducing their reliance on field salespeople for a few years as they sell more cloud-based software. Now, big distribution companies like US Foods Holding Corp. and W.W. Grainger Inc. are trimming their field sales and showroom staffs. In some cases, field reps will see bigger paychecks as they’re freed up to go after more lucrative clients. Many others, though, will see their compensation inevitably fall, e-commerce consultants say.
Easy to Target
Behind the push to bring sales teams inside are a greater willingness among purchasing managers to buy even expensive items online and new digital analytics tools making it easier to target them. In a 2015 survey Forrester conducted with Internet Retailer and B2BecNews, Forrester polled B2B buyers and found that 53% preferred researching orders online to dealing with a salesman, and by a year later it had grown to 68%, Hoar says.
Particularly at risk are salespeople who essentially are order-takers, dropping by companies once a week to see how many industrial fasteners a manufacturer needs. Big distributors are putting their field salespeople on only the top 10% of their customers, who account for 70% or more of their sales and need the most attention, says Jonathan Bein of Boulder, Colo.-based Real Results Marketing. The second 10 percent of customers account for about 10 percent of a company’s sales, so they and smaller customers can be served remotely, Bein said.
“If I just shed 15 field reps at $130,000 in total compensation, that’s significant,” he says. “That’s a big improvement in profitability, so it’s a real incentive to do this.”
‘Michael Jordan’ Sellers
Restaurant supply giant US Foods had 4,000 salespeople visiting independent restaurants in 2013, but has invested heavily in its e-commerce operation since then and now counts about 2,700 salespeople. The remaining reps are the better salespeople covering bigger territories—the company’s “Michael Jordan” sellers—Jay Kvasnicka, executive vice president of locally managed sales and field operations, told investors in March. While cutting some reps overall, the company has invested some of the savings in a new “team-based selling approach,” giving customers access to chefs, restaurant operations consultants and others, spokeswoman Sara Matheu says.
Grainger, an industrial and commercial distributor with $10 billion in annual sales, has cut its local store count to 251 from 390 five years ago in part because of a shift to e-commerce, according to regulatory filings. Meantime, it reassigned a portion of its roughly 3,000-person sales staff to create 400 inside sellers, spokesman Joe Micucci says.
“We didn’t necessarily have to have boots on the ground,” he says.
In some cases, startups are going without field sales reps at all. Fattmerchant Inc., a four-year-old Orlando, Fla., company, is going sans field salespeople as it tries to build its credit card processing business. It uses digital tools like Facebook Inc.’s Lookalike Audience program, where companies give the social media giant a list of current customers and Facebook shoots back a list of similar potential customers mined from among its users.
Where a field rep might average 15 sales a month, its inside salespeople are closing 30, CEO Suneera Madhani says. Its salespeople don’t get so-called “residuals” common in the industry—a cut of the follow-up contracts that many companies give—but they make up for it by earning commissions on a higher number of initial sales, Madhani says.
“We’re not having to pay a pyramid scheme of the managers, the agents, the sales reps,” she says.
No one sees salespeople disappearing overall, and companies will continue to need knowledgeable people to sell complex medical devices and back-office software systems, e-commerce consultants say.
At janitorial supplier Hill & Markes, e-commerce manager Mike Powers, who will speak at the B2B Next conference, says field reps will continue to demonstrate equipment such as new floor scrubbers. “The buyer is looking for insight and education on new products and procedures that can help them save money and time,” he says. Today’s customer, he adds, “is not interested in you showing up every Tuesday with donuts.”
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