Distributors across the board struggled online and offline during the pandemic, but a new survey of more than 600 companies provides a new look on where they were hardest hit.
The survey from ecommerce services provider Sage Group Plc finds that global events (81%), supply chain disruptions (75%), and rising costs and margin erosion (75%) were the biggest problems distributors dealt with during COVID-19.
Other chronic problems included:
- Unpredictable or fluctuating customer demand (71%)
- Increased competition from Amazon, eBay (68%)
- More regulation, legislation, and compliance (70%)
- Internal challenges to cybersecurity (67%)
- Managing cost and profitability (67%)
- Accurate forecasting of sales and demand (67%)
- Supply chain visibility (64%)
- Increased online ordering and procurement (63%)
“Distributors are questioning which direction they should go in with their digital transformation and what their end-goal is, while they respond to huge shifting trends such as direct-to-consumer, on-demand, and competition against hyper-scalers like Amazon and Google,” says Jessica Groopman, industry analyst and Kaleido Insights founding partner. Kaleido provided data and trend analysis for the survey.
The survey, which includes global respondents from across North America, Europe and elsewhere, finds that distributors are making changes to their ecommerce plans and investing more in new technologies, such as cloud computing, to stabilize and grow in a post-COVID-19 world.
For example, 34% of distribution companies are also using digitization and automation to make business processes more efficient, followed by implementing new collaboration tools and technologies (33%) and using advanced, real-time data analytics (29%) to better predict customer demand.
“With North America and European distributors in particular, the major differences I see are around the regulatory atmosphere and general geopolitical posture,” Groopman says. “It plays out in several areas, for example, tariffs, which have had a major impact on distribution markets.”
North American companies are putting in place more cloud-computing applications and services to speed up their pace of digital transformation. Distributors chose public cloud applications and services for many core technologies, including enterprise resource planning (ERP) at 47% and customer relationship management at 44%. North American distributors are further along than other regions of the world, according to the survey.
“North American distributors are also more likely than other regions to have a hybrid on-premises cloud ERP solution (43%) compared with around a third of EMEA and Australian firms,” the survey says. “Among the advantages of moving to the cloud, cited by businesses planning to do so, are that their current information technology (IT) infrastructure is costly to manage (50%), to time-consuming to manage (50%), or that it no longer supports their business requirements (33%).”
Distributors are embracing digital transformation and ecommerce, the survey finds. About 79% now have at least a plan or strategy in place to help solve challenges and problems related to cost reductions and improved data security (45%), faster delivery (42%), better customer service and experience (39%), and greater efficiency and productivity (39%).
“Digital transformation is an ongoing journey and the function of applying data, analytics and all the proliferation of emerging technologies is not just about catching up and having better ecommerce solutions or more target marketing. It’s about using this information for organizational intelligence, and cross pollination, to be more proactive, and that’s why the vitality piece is so crucial to understand,” Groopman says.
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