It was challenging enough to be a B2B retailer before Covid-19 hit. Increased competition, shrinking margins and changes in customer expectations have all caused disruption for these businesses.
COVID-19 has added greater complexity and uncertainty, radically changing how the B2B ecommerce market does business from the supply chain and inventory management to fulfillment and delivery. No company could have predicted how the pandemic would affect how they would operate and how they’ve—in a matter of just a few months—had to radically change their business models and accelerate their digital transformations.
One of the biggest areas that has been impacted is the supply chain. Pre-COVID-19, when businesses were operating in a stable environment, companies could use sales figures from the previous month or year, but this is no longer the case. According to B2B businesses Capgemini analyzed, only 15% have digitized their supply chains (although 60% of companies report that they want to digitize them). Businesses understand that if they cannot keep up with their stock fluctuation and demand, the buyer will go to another seller to get what they need.
Using sales figures from the past, no one could have predicted the demand for toilet paper or hand sanitizer. (One seller recently opened up an additional online store just to sell hand sanitizer!) But the future demand of these products is uncertain, making approaches like rapid forecasting so important to their longevity.
According to research from management consulting firm McKinsey, some sales trends during COVID were one-time purchases, a phenomenon called “Pantry Loading” while others may represent broader trends or changes in consumption. For example, (be they B2B or B2C) businesses may not be consuming more of certain products (toilet paper) indefinitely, but they may be making fewer stops to a physical store and loading up on more of a specific product when they do go. Sellers need to understand the routine changes of their buyers and determine whether an influx of sales for a specific product is reflective of a routine change or an overall pattern of consumption, such as hand sanitizer. Demand does not always equal a change in consumption.
COVID-19 has not only changed consumption patterns, it also impacted how people shopped. Businesses were forced to close their stores and consumers were hesitant to frequent those that were open. This caused B2B companies that were behind on the digital transformation curve to rush to get online.
Rapidly deploying ecommerce
In the first quarter of 2020, more companies were requesting rapid deployment of ecommerce, specifically in the medical and chemical industries, and among companies who had never sold directly to the consumer before (manufacturers and wholesalers). Before COVID, companies often had a wish list of different ideas. When the pandemic hit, companies realized that it was more important to move fast and make sure they had an online presence.
The pandemic also increased competition between retailers and manufacturers. Many manufacturers see the benefit of bigger margins selling to the consumer directly. They realize that retail volatility leaves them exposed.
COVID-19 also has also disrupted the global supply chain. Sellers are worried about how and when they’ll be able to fulfill orders forcing them to find alternative ways of sourcing and delivering products. For example, several companies had to close warehouses or manufacturing due to COVID-19.
In some instances, it forced B2B ecommerce sites to turn off order-entry completely. A poll by the Institute of Supply Chain Management found that 75% of supply chain managers reported that they experienced supply chain disruptions in some capacity due to transportation-related restrictions.
Mitigating supply chain risks
Moving forward, companies will need to mitigate risks that are related to the supply chain. This will again drive more-and-more wholesalers to sell directly to the consumer, but it’s also challenging them to rethink the role of China as the ‘World’s Factory’ and to implement better supply chain planning, such as improving their supply network, to mitigate any future risks related to COVID-19 or other outbreaks.
Finally, Covid-19 has forced the true blending of online and brick-and-mortar. B2B retailers need to adopt technology and approaches that were traditionally just for consumers. Already in Q1, more companies are wanting to deploy a “buy online, pick up in store” option. One survey found that 43% of respondents changed suppliers because of a lack of online ordering capability, while 42% changed due to the supplier’s inability to offer delivery during a lockdown.
B2B consumers now expect that B2B retailers provide the same services as B2C retailers. We don’t believe this is a trend. The expectations of the B2B consumer have been growing more in line with those of the B2C consumer for the past few years. COVID-19 is simply accelerating this transformation.
Mark Miles is vice president of Implementation at Sana Commerce, a provider of ecommerce technology and services.