Distributors and wholesalers are no strangers to B2B ecommerce. In fact, about two-thirds of all distributors have an online sales channel, according to research and analysis contained in the forthcoming 2019 B2B Distributor 300, a new research report from Digital Commerce 360, publisher of B2BecNews.
Today about two-thirds—271,310—of the nation’s total universe of 411,007 distributors or wholesalers have at least one ecommerce site, a log-in portal or both, estimates B2BecNews. Distributors and wholesalers also aren’t newbies in selling electronically to their customers. Last year about 40%, or $2.373 trillion, of all distributor and wholesaler sales was done electronically through a range of digital channels, including electronic data interchange, ecommerce and e-procurement among a few others, according to data in the 2019 B2B Distributor 300.
Ecommerce penetration varies among distributors
But the pace of B2B ecommerce activity among distributors as a group is inconsistent, say ecommerce analysts. For most of the distributors and wholesalers that are compared and listed in the B2B Distributor 300, ecommerce as a percentage of all sales accounts for less than one-half of all revenue.
For 78%, or 283 distributors and wholesalers, ecommerce accounted for a range of 10.1% to 25% of total sales, according to data in the 2019 B2B Distributor 300.
There are multiple reasons why many distributors have an ecommerce site, a log-in customer portal or both, say ecommerce analysts. There’s also multiple reasons why more distributors aren’t moving more quickly to make ecommerce a bigger sales channel.
For starters, many established distributors and wholesalers, especially in older industrial segments such as heating, ventilation and air-conditioning (HVAC), plumbing, industrial safety, electrical and others, still rely mainly on a branch network, distribution centers and an internal and external sales force to sell and distribute products.
A long road to investment in ecommerce
Many older distributors also are small and privately owned companies that can take as long as 30 years to make any significant investment in new technology or may not have the money, time and resources it takes over several years to build and develop an ecommerce channel, says Scott Benfield, founder of Benfield Consulting. “We find that 20% of distributors sell a bit over 20% of their total goods online and another 10% sell 15% or more of their goods online,” he says.
For many distributors launching or expanding online also has more to do with internal roadblocks then external factors such as available ecommerce technology, analysts say.
When asked their biggest challenge in building a B2B ecommerce business, 41% of distributors picked a lack of money as the most important inhibitor, according to a 2018 B2BecNews survey. More than one-quarter of distributors (27.8%) cited resistance from customers to buy online as another roadblock, followed by difficulty in recruiting ecommerce personnel (cited by 23.7%), lack of support from top management (20.6%), resistance from the sales force (20.6%) and competition from Amazon 15.5%.
The challenges distributors face
“For a lot of older distributors the challenges of going online maybe more internal than external,” says Lori McDonald, CEO of e-commerce services and website design firm Brilliance Business Solutions. “Their company leadership is older and they don’t have a huge level of expertise in ecommerce.”
Many distributors also sell in a niche market where the majority of sales are generated through long-standing relationships with existing customers and the relationships those customers have with established sales reps. “Despite the advantages of ecommerce in some niche markets, some companies are still very content to send an Excel list of the recurring products they want to buy to the rep they know and they are happy with that,” McDonald says.
Many distributors and wholesalers will struggle with growing ecommerce for at least the foreseeable future because they are going digital in ways that may be piecemeal and not strategic, says Karie Daudt, senior commerce consultant at agency Perficient Digital.
“There are distributors that have been selling online for at least a decade and ecommerce may only account for 3% to 5% of total sales,” Daudt says. “They say: ‘Our market is just not ready for ecommerce’ or ‘Our customers just aren’t ready for it,’” she says.
Think long-term strategy
Wholesalers and distributors that are struggling with ecommerce—or failing to achieve higher goals and objectives—will only succeed if they think of B2B ecommerce as a long-term strategy, invest in good ecommerce technology and build an ecommerce site with the end customer in mind, Daudt says.
Too many distributor websites and log-in portals “are just a front door on an enterprise resource planning system that deliver a poor customer experience,” she says.
Top management at many distribution and wholesale companies don’t yet see ecommerce as a strategic priority because their investment in ecommerce technology so far hasn’t generated any substantial return on investment, Daudt says. “Not succeeding at ecommerce can become a self-fulfilling prophecy,” she says.
Sign up for a complimentary subscription to B2BecNews, published four times per week, covering technology and business trends in the growing B2B ecommerce industry. B2BecNews is a publication of DigitalCommerce360.com, whose titles also include Internet Retailer and Internet Health Management. Contact Mark Brohan, director of B2B e-commerce research, at [email protected] and follow him on Twitter @markbrohan.
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