For the last two years, the global pandemic has totally upended the way distributors and wholesalers conduct business. Digital commerce is in—phone calls, mail, email, and manual order processing are not. Many distributors are far down the path for B2B ecommerce with a strategy in place that makes sense for their organization. Others are just getting started and still others remain just sitting on the fence. But regardless of their status, B2B sellers such as distributors that truly embrace ecommerce as a priority stands to gain digital sales, customers, and market share.
For some perspective on how distributors and wholesalers need to change with the times, Digital Commerce 360 asked Jay Schneider, a noted ecommerce analyst and subject matter expert on B2B distribution and digital transformation, for some answers. Schneider is the founder of B2B Squared in Brookfield, Wisconsin, an ecommerce consulting firm serving manufacturers and distributors.
DC 360: B2B ecommerce is accelerating on multiple levels, not the least of which is annual sales growth. In general, where are distributors/wholesalers being impacted, and why?
Schneider: For some in the distribution space, “ecommerce acceleration” may be a relative concept. Certainly, as a percent of overall revenue, many distributors are seeing ecommerce continue to grow.
But depending on your market, the ‘acceleration’ of ecommerce for many organizations in 2020 may have led right into the supply chain issues many have experienced in 2021. Obviously, these pains are real and shaping the overall performance of the business—not just ecommerce.
Certain areas in the medical and safety areas may be less impacted, but that’s really been offset by the pain many are seeing in industrial, automation or building spaces where supply chain issues associated with metal, plastic, wood, chips, or other raw materials continue to challenge distribution.
While this has been a challenge, the overall sentiment in distribution remains high for ecommerce and digital. The short-term supply challenges haven’t tempered enthusiasm for overall digital business.
DC 360: What did COVID-19 teach distributors and wholesalers about digital commerce in 2021? What hard lessons should they have learned, and why?
Schneider: If there were those in distribution doubting the long-term significance of digital, COVID-19 showed them that digital isn’t just an offering, it must lead the business. Even prior to the pandemic, I was shocked at how many of our clients still largely employed an on-site, direct sales model. Obviously, that changed with the pandemic—and it’s not going to be much different, given the delta variants.
But, if nothing else, it’s my hope distributors have learned that we are on the brink of a tipping point in B2B. The leaders in digital customer experience will be in the best position. Those who haven’t properly committed to the journey are at huge risk.
The longer it takes to deliver on that customer contract, the more exposed the organization is. The competition is not standing still. Amazon isn’t either.
Distributors need to create value—or else.
DC 360: What are the biggest B2B ecommerce challenges facing distributors and wholesalers, and how can they overcome them?
Schneider: For distribution, it still comes down to defining and delivering value. In some market spaces like automation, and other engineered or designed solutions, value is easier to define. Distribution partners own the customer relationship and design the solution. But distributors in largely SKU-based markets will need to pivot their models to ensure they provide value and deserve to exist.
Some of the oldest challenges still seem to be plaguing distributors. An example is product data and customer experience. If product data contained, for instance, substitute products this may be valuable during challenging supply-side times.
As for product data, we’re also working with manufacturers to get their product data better for channel partners and market segments. Many of them need to own this far better than they have. But, in many cases, the enrichment distributors perform is part of the value coefficient.
When Justin King and I worked together at B2X Partners, we encouraged many distributors who are just getting into ecommerce to stay as close to out-of-the box as possible. These days, I still see sites that look out-of-the box. Editor’s note: B2X Partners is a consulting firm. King, now vice president of industrial marketing at Salsify, is an industry speaker and author of Digital Branch Secrets: eCommerce Playbook for Distributors.
There is little configuration around search and a lot of friction in the overall buying process. So how do these get fixed? Distributors will be well served to continue to enhance product data.
It’s time for many manufacturers to take ownership of their own brands, especially when it comes to product data, ensuring that their channel partners have the right data. I also think that distributors need to look inside the entire operation to understand where data may be leveraged.
In most cases, ecommerce platforms come on the heels of decades of sales and order data history. How can this data—and other repositories in the organization—be used to better enhance the customer experience and personalize the customer experience?
DC 360: B2B ecommerce growth is still highly uneven in 2021 because of the result of the pandemic on various markets. What’s ahead for 2022?
Schneider: This is the crystal ball that I think we’d all like to have. I’ve asked this same question as well. The short answer seems to be that it’s hard to know. Getting back to whatever “normal” looks like is going to take some time.
I haven’t heard a lot of optimism that will happen in 2021 but most distributors and manufacturers are holding out hope that in the first and second quarter of 2022 things will get back to some semblance of order, although though that may depend on the component or material.
DC 360: It’s still a confusing time for many distributors and wholesalers and many are still unsure how to identify the best path to online growth. What should they be doing?
Schneider: In the simplest terms, the answer is easy: Focus on customer experience. When Justin (King) and I would help distributors with selecting ecommerce platforms, we’d always encourage staying close to the box—at least for first phases of launch. This was to stay fiscally responsible and define functionality that originated with the customer, not internally.
Then, after many of these same companies had established digital businesses, we’d highly recommend journey-mapping or user testing projects—to little avail. I could never understand why this was such a hard sale. But today I still see many ‘out-of-the-box’ sites that haven’t appreciably changed much since launch.
What should distributors focus on with respect to customer experience? I think there’s a couple areas.
Product content is a program—not a project. When it comes to what’s in-stock and what substitutes may be available, B2B buyers have a clear preference for performing these activities online. The data must be right and special consideration in search and other areas will help customers more easily locate what’s available.
This dovetails nicely into what should always be a focus: Customer adoption. Helping customers understand that the website has the most up-to-date inventory, potential substitutes, and the ability to be informed when something is back in stock falls in line with the self-service model most B2B buyers seek.
Another area that I think is often overlooked is finding additional ways to leverage data within the organization. That’s not just ecommerce data. There also is structured data that may be in enterprise resource planning (ERP) systems or unstructured data that you may have in customer service FAQs, and elsewhere. How can that data be leveraged to create a better buying experience for customers? Product recommendations and other relational items may be low-hanging fruit.
If we look at the business-to-consumer (B2C) or retail side, we see so much focus on making things easier for the consumer. How do we make it easier for the trade customer? While things like personalization sound like B2C concepts, we need to understand how these concepts may be incorporated into B2B—like segmentation. This will further the value distributors can bring.
DC 360: Should distributors/wholesalers fear Amazon Business?
Schneider: My high school track coach used to say: “respect all, fear none.” Distributors’ focus must be on continued gains in customer adoptions and overall share of wallet.
If this is the focus and real results are being achieved, then I think distributors have less to fear from Amazon.
However, with the offering that Amazon has today, if there’s anything we’ve learned is that they will continue to reduce friction in their overall model. If it’s a SKU that’s easy to buy online and doesn’t require great product attribution or specific content, Amazon has a very good story for that.
But one of the things I find interesting in talking to B2B end users, such as distribution customers, is that many of them are less motivated by price than by ease of purchase. We’ve always believed independent distributors can win—but they need to play the game they can win, not the one defined by Amazon.
DC 360: What happens to distributors and wholesalers’ 2022 strategic planning for B2B digital commerce if supply chains don’t return to a more normal state anytime soon?
Schneider: What I always found interesting was how the most successful companies, regardless of market, would advertise the same or more in periods of economic decline. So, while others were pulling back or entirely on ad spends, the companies who intended to gain market share after the downturn were investing.
So, the answer should be, hopefully not many changes, even if the supply chain issues take longer to resolve. Meaning whatever investments distributors plan to make in 2022, specific to digital, continues to be planned and executed accordingly. This is a really great time to continue investing in the people and processes that will ultimately favor distributors.
DC 360: Even with accelerated digital commerce, will the current business model distributors and wholesalers use to sell remain relevant? Why or why not?
Schneider: I think that’s the ultimate question. In short, the answer would be “no”—at least as far as the direct sales approach of the past. Let’s just look at where we’ve been. We all remember the study about how many B2B sales jobs would be lost. At last count the number was pretty accurate.
And that had no factor for a global pandemic. So, wherever we were headed before is only going to become more relevant faster. The good news: I think most distributors understand outside sales and digital sales, not only the need to coexist, but become one. The hybrid sales model is in full force for many (hopefully most) now. Those who continue to push the envelope, in that regard, we’ll continue to see their value, and overall prospects increase.
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