Distributors Struggle with Online Pricing - Modern Distribution Management

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Distributors Struggle with Online Pricing

Companies have the most difficulty with a lack of consistent pricing across channels, technology issues and poor online customer experience. Read More.

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Traditional distributors often lag behind online sellers in leveraging technology to set the right prices in all their channels, according to an MDM survey of 249 industry leaders, featured in a recent webcast.

Sixty-percent of survey respondents say their online prices are about the same as prices in their other channels, while 32% say their online prices are generally higher, and 8% say their online prices are generally lower.

“Pricing should be set on competitive factors and factors specific to the customer and the transaction, and doing that well requires software,” Ian Heller, MDM president, says.

About 58% of survey respondents extract their online prices from their enterprise resource planning software (ERP), while 27% do so manually. When asked how they track their competitor’s prices, 45% say they spot check, and only 8% say they use software to scrape the data from competitors’ websites.

“Pretty much every digital player that you are competing with is scraping your prices. They know what you are publishing as your ask price,” Heller says. “Spot checking is really not a good substitute. It’s a manual process. To use that in place of what’s a relatively inexpensive and easy to install technology frankly shows a naivety about what it takes to compete online.”

Although 35% of survey respondents require an additional step for customers to determine price, Heller believes it’s a mistake to not show prices for all products online. At least 62% of survey respondents agree that showing all pricing online improves their close rate for sales.

When asked if they qualify online buyers, 42% of survey respondents say they require a business relationship or proof of business entity, while 37% say they sell to anyone online, and 20% also say they sell to anyone online, but professional customers receive a different price.

Forty-four percent of survey respondents sell their entire product catalog online, while 20% sell their best-selling or popular products online.

Heller encourages industry leaders to assess return on investment from online sales. “It’s incumbent on e-commerce and marketing people to collaborate with finance and sales and set goals and find a way to estimate the benefits [of online sales], so you can build a business case to justify the investment,” Heller says. “If you don’t do that, you’re not going to have the technology necessary to compete in a marketplace that’s increasingly requiring digital capability.”

Still, that’s no easy task in an industry that historically puts heavy emphasis on customer relationships. In implementing an online strategy, survey respondents report having the most difficulty with a lack of consistent pricing across channels, technology issues and poor online customer experience.

Differentiating Yourself  

Reliability/reputation, product quality and delivery speed rank as the highest factors when distributors and manufacturers cited why customers bought from them. Price and location rank the lowest among the factors, the survey found.

Customers “tend to go on expertise. While price is a factor, it is not the most important factor or the deciding factor that clients use to make decisions. Price remains a significant component of the sale,” says Austin Garrison, founder and managing partner of Concourse Capital.

So, how can distributors differentiate themselves in a digital world? “It’s clear that distributors are leveraging their brands and reputation and relationships, but they are struggling to do that online in a way that allows them to charge forth and get margin for it,” Heller points out.

Likewise, “value-added services are not currently transitioning well to online sales” in the industry, says Garrison.

In the past, distributors have tended to bundle them and include that in the price. But now, they are competing with online sellers that offer lower prices without services.

“This ability to add service, which is empowered by this relationship that helps you to understand your customer’s needs in an in-depth way, has always been an important differentiator for distributors versus anybody else who sells to these customers,” Heller says.

This blog is No. 8 of MDM’s 10 Most-Read Blogs of 2019. Each week as the year winds down, we will share these most popular posts until we reach No. 1. View No. 9 and 10.

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