The Benefits of an Online Presence for Small Distributors - Modern Distribution Management

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The Benefits of an Online Presence for Small Distributors

A lack of financing, experience and access to talent often keep distributors from engaging in e-commerce, a recent MDM survey found. But having an online sales channel is critical to new customer discovery, MDMs John Gunderson said in a recent webcast, with more than 80% of distributors expecting their online presence to grow moderately or significantly in the next five years.

Competing online with larger distributors that have an established e-commerce presence is becoming easier and more affordable for small distributors to achieve. In a recent webcast, John Gunderson, vice president of analytics and ecommerce for Modern Distribution Management, and Austin Garrison, director of industry research for MDM, discussed this and other digital trends for small distributors.

“The playing field is leveling. The ability to become a digital player is easier than ever as a big or small distributor. Software and hardware costs continue to become more reasonable. The ability for distributors to find the right combination of internal resources and external partners is getting easier every day,” said Gunderson. “Smaller distributors can win.”

Money, experience and lack of internal talent are three top roadblocks that distributors face, Gunderson said. But those roadblocks are surmountable by combining internal and external resources.

At most distributors, there’s more management support for online efforts now compared to five or 10 years ago. Garrison says, “There’s a recognition that online presence is critical for customer discovery, and that will translate eventually into e-commerce sales. At the same time, there is a difficulty in translating online efforts into actual new clients.”

Having an online sales channel is critical to new customer discovery. However, almost 50% of distributors reported that less than 5% of their new clients originate from an online presence, according to a recent MDM survey.

“I thought this was a really interesting potential disconnect. The feedback is, ‘We’re not getting any new customers through the online channel,’ but it’s a front window into your business,” Gunderson said. “This could be a tracking situation for a lot of distributors. Most of your first contact is coming through your website.”

Even without making a sale, having an online presence still helps companies communicate about their products and services, improve customer service and meet customers’ expectations for speed and convenience.

“Understand what online engaged means. Build a scorecard for what online engaged means. You will find that people who are engaged online and buying through you normally will outperform people who are just picking up the phone or coming into the branch,” Gunderson said.

Future Goals

Distributors are optimistic that their online sales will grow. Eighty-one percent predicted their online sales will increase moderately or significantly in the next three years, while 95% expect moderate or significant growth in the next five years.

More than 40% of distributors have specific online sales goals, and almost two-thirds of them expect to meet their online sales goals this year, according to the MDM survey.

“You have to set goals for the online channel. You have to understand what average order value is. You have to build deep, multi-touch marketing campaigns. You have to be able to build a non-fuzzy ROI,” Gunderson said.

He added, “Moving toward a P&L for your online platform, that’s a critical step in order to grow. As a distributor, you can’t grow what you can’t measure.”

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