Manufacturers and distributors both grew online last year, but distributors grew much faster than manufacturers, based on data analysis in the forthcoming 2023 Manufacturing and Distribution Report from Digital Commerce 360.

All in, manufacturers grew B2B digital commerce about 15% to $623.3 billion in 2022 from $543.3 billion in 2021.

Distributors, meanwhile, grew year over year much faster, with ecommerce sales growing 25% in 2022 to $1.4 trillion from $1.1 trillion in 2021.

Distribution companies move faster on digital commerce and transformation than manufacturers because distributors’ prime customers are now younger and increasingly prefer digital channels to traditional paper and in-person purchasing.

Young buyers prefer digital self-service commerce

In a study last year based on a survey of 14,000 B2B buyers, Forrester Research found that young buyers, far more than their older peers, preferred digital and self-service purchasing methods over traditional in-person options.

Among B2B buyers, those born in 1981 or later “now hold the keys to decision-making for the majority of purchases,” Forrester says. It defines young buyers as millennials and Generation Z and older buyers as baby boomers. Millennial and Gen Z buyers are much more digital in their channel usage than their older counterparts. For example, 35% of young buyers say they will use an enterprise app to make corporate purchases.

But 24% of older B2B buyers prefer placing orders with an inside sales representative, compared with just 19% of millennial and Gen Z buyers.

Fastenal Co., an industrial and construction products distributor, is typical of the large public distribution companies seeing more digital purchasing across the board because of fast-changing customer demand.

Fastenal is on a mission to grow digital commerce. But for Fastenal, the online road takes many forms and is not as linear a path as building and maintaining a single ecommerce site.

Fastenal is building out its digital channels through many facets, including internet vending machines, ecommerce, and electronic data interchange. It has reached the day when electronic sales account for half of all revenue, with first-quarter digital sales at 54% of total sales for the period ended March 31.

A big priority for the company moving into 2023 is building out what it calls its digital footprint.

Fastenal grows its digital footprint

“Ecommerce, the next piece of our, what we call, digital footprint, daily sales rose 48% in the fourth quarter,” president and CEO Dan Florness said. “Again, incredible traction in that area. We have really seen traction move in the last three years, partly a function of COVID. And I think a lot of people are seeing those kinds of patterns, but also, we have gotten better as an organization in our ability to execute on ecommerce.”

Fastenal reported an increase in 2022 sales to $6.980 billion. That is up 16% from $6.010 billion in 2021. Meanwhile, ecommerce sales were $1.07 billion, compared with $925.1 million in 2021. Based on $1 billion in ecommerce sales, Digital Commerce 360 projects that ecommerce accounted for about 15% of all sales in 2022.

Fastenal includes in its digital footprint ecommerce sales along with customer transactions processed through its FMI inventory management programs, including FASTtock, FASTbin and its FASTVend internet-connected vending machines. The company’s digital footprint in the fourth quarter of 2022 represented 52.6% of sales. That is an increase from 46.4% of sales in the fourth quarter of 2021.

Fastenal is growing out its digital footprint in large measure because of customer demand, says Edwards Jones research analyst Jeff Windau.

“Fastenal is having success implementing on-site locations and product vending machines,” he says in a research brief. “The pace of customer implementation has been improving since the pandemic lows.”

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