Developing an understanding of a marketplace can be an interesting and revealing exercise. This is especially true when the subject product offering is technology-based, as this class of products tends to enter and evolve much more rapidly than things such as capital equipment or basic services.
Servispart Consulting, a United Kingdom-based research and consulting firm that focuses on the manufacturing sector specializing in strategy and optimization of aftermarket parts and services, recently completed a compelling market study. The study targeted manufacturing firms in the UK and Europe representing fifteen different vertical sectors ranging from heating, ventilation and air-conditioning (HVAC) equipment to industrial products, the latter representing 16% of respondents.
The survey covered firms diverse in size, ranging in annual revenue from 20 million to more than 1 billion British pounds. The survey asked several questions regarding their parts business and the use of technology as a lever in growing sales. The resulting responses revealed an interesting conflict that manufacturers seem to struggle with and that could have a potentially huge impact on their strategic success.
Manufacturers know what matters
Manufacturers participating in the study were asked, “To what extent do you think that the following technologies will impact or threaten your aftermarket parts and service business?” A list of technologies was provided, and the respondents were asked to answer with a score for each technology. When the scoring was tallied, the ranking of each technology from most to least impactful was:
- Big Data analytics
- Internet of Things (IoT)
- 3D Printing
- Artificial Intelligence
- Autonomous transport
- Social Media
- Augmented/virtual realities
At the top of the list was ecommerce, indicating that this technology is clearly on every manufacturer’s mind, if not at the top of their list of key technological considerations. This finding should not be surprising to anyone, as ecommerce has revolutionized commerce in the business-to-consumer world and is considered a “must-have” for anyone selling anything to consumers. Whether or not you have a presence on Amazon, eBay or some customized ecommerce web site is not as important as having an online presence for sales anywhere a customer wants one. If you are not online, you are not competitive.
In the business-to-business world, one where most manufacturers do their business, the urgency of ecommerce implementation is not nearly as obvious. While manufacturers admit the need for an ecommerce strategy as perhaps the most important and impactful technology available, they struggle with making it happen.
B2B ecommerce implementation is not a priority
In order to gain an understanding of what technologies are being implemented by manufacturers, Servispart Consulting asked the question, “Which of the following digital technologies are you using or implementing?” A list of 19 technologies was presented. The scoring was designed to determine to what extent is the implementation of each technology a priority of the respondents. Curiously, ecommerce ranked fourteenth—fourteenth! While being considered the most impactful technology available, the same group ranked it as fourteenth in priority in comparison to other technologies. Clearly, there is a disconnect between impactful versus priority.
“We were somewhat surprised and interested by this finding,” said Adrian Botham of Servispart Consulting. “Having ecommerce at the top of the list for most impactful technology while ranking it very low in priority begs the question, why aren’t manufacturers making ecommerce an important part of their growth plan? This is even more perplexing considering the pervasive presence of B2C ecommerce and the potential for immediate gains in aftermarket parts sales online.”
Curious alignment: manufacturing aftermarket priorities and ecommerce
When asked the question, “What do you consider to be your company’s top aftermarket challenges or priorities over the next 12 months?” three out of the top four responses said their challenges could be directly addressed by ecommerce. These include “Improving customer service/experience”, “Updating aftermarket IT systems” and “Growing parts sales.” Although the implementation of an ecommerce system that includes aftermarket parts could have a direct positive impact on these priorities, manufacturers still struggle with the prioritization of eCommerce as a strategic initiative.
As part of their survey, Servispart also conducted telephone interviews with some of the manufacturers to get a deeper understanding of their challenges. “When we asked manufacturers why they weren’t prioritizing ecommerce solutions,” said Adrian, “another concern often cited by manufacturing leaders is the risk of upsetting existing commercial relationships with dealer networks or large customers, for example. In our experience, these concerns are more about perceptions rather than reality, because the eCommerce channel tends to serve a distinct (and rapidly growing) market segment of buyers that the dealer channel is currently failing to access.”
B2B eCommerce growth underscores its importance
In the B2B world, ecommerce is a relatively young technology, but it’s growing rapidly. According to Forrester Research, B2B ecommerce transactions will reach $1.2 trillion by 2021. This will make up more than 13% of all B2B sales in the US. Another report from Frost and Sullivan points out that global ecommerce sales will reach over $6.6 trillion by 2020 and will exceed B2C sales, valued at $3.2 trillion by 2020. It is very clear that B2B ecommerce overall is experiencing unprecedented growth, but the manufacturing segment is lagging in adoption.
Why the resistance?
Implementing a B2B ecommerce system to sell whole goods is a straightforward proposition, and probably represents the majority of B2B adoption efforts. When you start to talk about ecommerce for more complicated products such as aftermarket parts or configurator-based assemblies, however, the vision becomes more muddled. For example, it’s fairly straightforward to sell a tractor to a construction company online, but selling the thousands of parts that make up that tractor in an ecommerce system may seem daunting. Corralling parts data out of an ERP system so that you can display the information in a meaningful way to buying customers can be like herding cats. Data is often incomplete, and the ERP system itself may be in need of an overhaul. Implementing configurators poses another set of challenges as configured products often require unique user experiences in order to make them acceptable to demanding engineers.
The fundamental issue with the lag in manufacturing implementation of ecommerce often lies with challenges such as these. Manufacturing requirements in the area of ecommerce are different than a purely whole-goods sales scenario. In order to roll out a comprehensive ecommerce strategy, all aspects of the manufacturers sales operation need to be considered. Beyond whole goods or original equipment, aftermarket parts, configured assemblies, rental fleets and other opportunities for revenue must be folded into the overall plan. When tackling this problem, it may seem like an overwhelming exercise, and the natural reaction is to balk on the decision and delay it until readiness is more apparent. The problem is, you are never really completely ready and your competitors are not standing still.
Getting past the barriers to eCommerce
Without question, the most important requirement for moving forward with a strong manufacturing ecommerce strategy is an executive level sponsor or ecommerce champion. Preferably at the “C-level” of top management, this person should be seen as the change-maker, or the one that gets you past the seemingly unsurpassable roadblocks to ecommerce deployment. An ecommerce initiative will touch many areas of the business and will also require a coordinated effort from many points of view. Having an executive sponsor at the highest level possible will help ensure that the system deployment will get the attention it needs.
In addition to the ecommerce champion, it is vital that a software vendor is selected that understands B2B ecommerce in the manufacturing world. Selecting an integrator that has a history of B2C deployments for your manufacturing ecommerce system is like pounding a square peg into a round hole – it just doesn’t fit. Choose a partner that not only can offer you the breadth of capability in their ecommerce product that you need, but also one that truly comprehends the special needs of manufacturing. Things like ERP integration, part-pricing optimization, part cataloging, configurator design and quote preparation should come easily to the provider you choose to do business with. If they don’t understand manufacturing and engineering data, then you’ll spend more time explaining your needs than implementing the solution.
Why make it a priority?
The time has come to move beyond resistance to ecommerce for any manufacturer that wants to stay competitive or be a leader in their market. Furthermore, the percentage of buyers that have expectations of sophisticated online commerce channels is exploding. The same person that buys all their consumer goods on Amazon wants an equivalent experience as a buyer for XYZ manufacturing. They don’t want to pick up the phone and call an agent—they want to buy what they want, when they want 24/7, through a sophisticated website.
This dynamic in the industry cannot be ignored, and action toward meeting the evolving expectations of B2B buyers must be made a priority. Certainly, the change is potentially challenging and there are always other things that seem to take precedence. However, the longer an ecommerce decision is put off, the more likely that an innovative competitor will take away sales and erode your position in the market.
Making B2B ecommerce in manufacturing a priority is the first step toward an inevitable and transformational move for manufacturing businesses. With so many compelling reasons to do it, the real question you should be asking yourself is, “What are you waiting for?”Favorite