Editor’s Note: Manufacturers of all sizes are at a crossroads. Once a highly manual and conventional distribution-and-sales process for products and services is now going digital and at an ever-faster rate. Many manufacturers know the harsh reality that the pandemic entirely changed their distribution, supply chain and sales processes—and for good. For many manufacturing organizations, the only way to successfully move forward is to embrace ecommerce and related digital technologies that are the preferred product research and purchasing path of younger business buyers. Manufacturers face big decisions and challenges ahead as they look for opportunity online in a post-pandemic world. To help them find solutions, Digital Commerce 360 B2B recently conducted this question-and-answer session with Brian Beck, a recognized B2B ecommerce analyst, author and managing partner of Enceiba, an agency that helps manufacturers and brands sell through Amazon.com and Amazon Business.
DC360: Business-to-business ecommerce is accelerating on multiple levels right now, not the least of which is growth in annual sales. In general, how are manufacturers being impacted, and why?
Beck: In 2021, we are seeing so much demand being driven by ecommerce channels, including on Amazon, that manufacturers are now feeling the impact in their supply chains. As we emerge from the pandemic, it does not seem there are any problems with generating sales, but instead with getting the components and materials necessary to meet demand, particularly if these components are coming out of Asia.
I had two different mid-market manufacturers recently tell me that they are having problems just getting containers allocated to them for shipments coming from China. Without the raw materials necessary to make their products, they are being forced to carefully allocate inventory to the highest-margin channels and increase prices in some places to ease pressure on demand.
I believe this situation will have long-term impacts on sourcing decisions, and manufacturers will continue to expand options for onshore or near-shore sourcing. And on the distribution side, partially because of the manufacturer bottleneck, I believe companies are going to increasingly look to diversify their supply chains.
This includes looking at assortment expansion options such as drop-shipping and creation of vertical marketplaces. These approaches expand customer buying options and make the supply chain less risky for resellers in a capital-efficient manner.
DC360: What did COVID 19 teach manufacturers about digital commerce in 2020? What hard lessons should they have learned, and why?
Beck: I am seeing the pandemic as the urgency driver that the B2B industry needed to finally wake up from their collective “business is good enough” slumber. The executives at hundreds of thousands of firms suddenly realized their sales teams could not get in the door and sell the way they traditionally have, and now digital channels were the only way to reach customers.
This is not just ecommerce—this relates directly to digitally enabled sales teams. This is not “Death of a Salesman” but is instead the reinvention of sales channels. There will still be a role for the sales force, but the low-value order takers are now exposed as irrelevant, as this volume has either shifted online for those B2B companies that were digitally prepared pre-pandemic or went to other suppliers that were ready for the surge in online demand.
I believe that high-value, consultative and strategic selling activities will largely remain with sales reps. However, digital and physical must work together more closely than ever before, and companies acting on this will win. The stubborn organizations that cling to outdated sales models will meet their demise, and more quickly than they would have if the pandemic had not occurred.
DC360: What are the biggest B2B ecommerce challenges facing manufacturers, and how can they overcome them?
Beck: The biggest B2B ecommerce challenge manufacturers face is simple. And it has nothing to do with technology or best practices, which all exist. Instead, it is about incorrectly thinking about and structuring for a successful digital transformation.
B2B firms get in their own way by forcing ecommerce to play by traditional company rules, processes, and structures. This often manifests in B2B companies failing to hire the right people or forcing legacy decision-making processes and reporting structures on the ecommerce function. Ecommerce operates differently. Success requires nimbleness and risk tolerance—decision-making with 80% (not 100%) of the information.
This runs completely against the character of B2B firms. For example, I am working with a $15 billion manufacturer right now that cannot wrap its head around the fact that they should be hiring ecommerce people that have two or three years of experience across eight or 10 companies over a 15-year career versus the 20+ year veterans of a single company they are used to hiring. Ecommerce people look different, and this is good and necessary.
Manufacturers should look to the model of the distributors that have been successful with ecommerce. For example, when Grainger set up its ecommerce operation, they took it completely out of the corporate structure and put it in a different location, freeing it to make decisions and operate semi-independently.
DC360: B2B ecommerce growth was highly uneven in 2020 because of the result of the pandemic on various markets. Is history repeating itself in 2021?
Beck: No, I think 2021 will be a story of more sustained growth in B2B ecommerce versus 2020. The big variable here is supply chain. Whether B2B companies get the raw materials and finished goods they need out of Asia will determine if they have enough product in stock to meet the growth of ecommerce demand we will see this year.
DC360: It is still a confusing time for many manufacturers, and many are still unsure how to identify the best path to online growth. What should they be doing?
Beck: There is only one answer here: manufacturers need to shake off the vestiges of their legacy channel conflict fears and fat and happy leadership approach, and act. And action needs to start with confronting the brutal reality that their customer has changed and the majority of B2B buyers are now digital-first millennials.
Manufacturers need to be selling directly to the end users of their products via ecommerce as well as selling on Amazon Business and other marketplaces in ways that do not give away all control of pricing and brand. Distributors need to recognize that their business has changed and look seriously at their value add to their customers. The value proposition must move beyond simply price and selection. They should be looking to double down on their unique industry expertise to solve their customers’ business problems and not just sell them widgets.
All types of B2B companies need to be digitally enabling their sales teams and focus on getting people off the bus that do not embrace these changes. The time has passed for people that do not get it and are not willing to evolve.
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