Should You Prepare for the "Wholesalepocalypse"? - Modern Distribution Management

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Should You Prepare for the “Wholesalepocalypse”?

The first stage in addressing a crisis to realize one exists

If you read business news, you’ve likely come across the term retailpocalypse, which summarizes the effect online retailers are having on brick-and-mortar stores. Breathless business writers predict doom and gloom for traditional retail chains and there’s some evidence to support the dire warnings. Retail store closings are accelerating and there’s no reason to think the trend will slow down or reverse.

There are lots of alarming data points. Forbes reported that during Amazon’s 2017 “Prime Day,” (during which the company provides huge incentives and discounts), store visits dropped 32 percent from consumers with the Amazon app on their phones. For reference, half of all millennials have the Amazon app on the home screen of their mobile devices, according to online analytics company comScore. Two realities: that percentage will probably grow, as will the percentage of your customers made up by the millennial population.

The first use of retailpocalypse I can find was a comment on on March 15, 2015 by a user who predicted that, among existing store-based retailers, “by 2020 only Walmart will remain.” Now the term is ubiquitous; Google it and you’ll find it’s gone from zero to 180,000 uses online – in three years.

But if you Google wholesalepocalypse, you will get zero results, meaning I invented a word and I darn sure wish I didn’t have to; but I promise you it’s necessary. Because if Amazon Business and other pure-digital players keep growing at their recent pace, a wholesalepocalypse is coming to distribution. If so, what should you do about it?

The first stage in addressing a crisis is to realize one exists. Second, you need to gather all of the data you can get so you understand it in detail. Third, you need a plan about how you’re going to deal with it.

If you believe in the coming wholesalepocalypse, I suggest you start researching to prepare for your planning. You need to understand these digital players in depth – do a deep dive on how they use technology, which is about a lot more than websites. They’re using advanced marketing automation, “big data” and artificial intelligence to build new capabilities that provide benefits that never occurred to us long-time distribution “experts.”

Amazon knows more about my shopping preferences than I do and this is obvious every time I look at the items they suggest I buy. For a guy who loves photography and motorcycles, I'm tempted by Amazon like a drug dealer offering cocaine to an addict. “I probably shouldn’t, but just this once…” Boom! A new camera and helmet followed by indulgence remorse. Good thing they have an easy returns policy. 

Even more important than understanding these new competitors is understanding your customers. The problem with market research, though, is that customers don’t know any more about upcoming technology than you do, so you can’t ask them to prescribe your innovations.

Imagine going back to 1850 and surveying farmers about what innovations would make them much more productive. They’d ask for a horse that can pull a plow twice as many hours a day on half the amount of hay – because they couldn’t conceive of a tractor.

This is where the pure digital players are so good – they understand future technology capabilities better than everyone else and they are pretty good at predicting how customers will embrace the benefits available from the innovations. When Amazon introduced its “Echo” smart speaker and Alexa, its digital assistant, how many of us thought, “Wow, they’ll probably put those capabilities inside our customers’ businesses for ordering supplies!” I know I didn’t, but that’s what’s happening. These types of innovations are moving markets in a very different direction than most of us are used to in our careers.

This implies two realities about research in our digital era. One, you have to get customers to focus on expressing their needs, not on asking about solutions they can’t really understand. Second, you have to become quite expert at future technologies yourself. Between these two types of research, you will have to infer from the data what technologies will be most beneficial for your company in your quest to meet your customers’ needs.

Over many years in this industry, I’ve found that most distribution companies don’t have robust research and strategic planning capabilities. These skill sets have never been more important than they are now. What I’m recommending is a tall order for companies that aren’t already accomplished at researching competitors, customers and technology. For most companies, it will require hiring an outside firm to help; regardless, I recommend you get started immediately.

The wholesalepocalypse is coming and you don’t need to worry about zombies eating you. You need to worry about pure digital players eating your market share.

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