While e-commerce platforms and marketplaces aren’t new, the pandemic is fueling the need for distributors to take a harder look at them.E-commerce shifted last year as the various marketplaces and online distributors put an increased focus on reaching customers who were working from home, buying from home and consuming products from home. On top of that dynamic, some distributors were faced with manufacturers nailing up their own e-commerce websites in an attempt to sell directly to customers by bypassing distribution channels.
During the recent MDM webcast “Navigating E-commerce Sales Channels and Marketplace Options,” panelists outlined the benefits for moving to an e-commerce site as a means to reach new customers while accessing more analytical data to drive or adjust their product offerings.
For starters, there’s not just one type of e-commerce platform, according to Zoro.com’s Tracy Buelow, senior director of business development, whose company sponsored the webcast.
Zoro is an online distributor of products in the B2B space with a customer base comprised of primarily small-and medium-sized business owners who are looking for simple and efficient e-commerce-based transactions across a broad range of products.
“One of the most compelling reasons why our customers love coming to Zoro our customer service,” she said. “They can contact customer service to ask questions, check on orders, and even place orders sometimes. Believe it or not, this is not common in marketplace models. And in the B2B space especially this provides great value to our customers. Starting off, e-commerce can be very intimidating.”
Buelow said e-commerce penetration in the U.S. “jumped forward 10 years in a matter of 90 days,” due to the Covid-19 pandemic.
“And in fact, a recent B2B marketplace report by Digital Commerce 360 indicated that 89% of purchasing managers are purchasing the same or significantly more on B2B marketplaces as a result of COVID-19,” she said. “And over half are buying at least 26% of all products and services on commercial and vertical industry marketplaces.
“These days, participating in e-commerce is really not a question of ‘if’ but more of a question of ‘how.’”
Before jumping into the benefits of e-commerce platforms, it’s worth noting the differences between a curated online distributor company, such as Zoro, and a marketplace, such as Amazon. Amazon is an open marketplace.
“There are often different prices for the same item, different delivery timeframes, and then direct competition of suppliers right on the spot and the suppliers are often visible to the customer,” Buelow said when describing a marketplace. “Zoro is more of a curated distributor model where we do most of the activities that you would need to do yourself. We manage the relationship with the customers, everything from the orders, the pricing, the returns, the questions, the marketing, and getting them out in those search channels. All of that is work that we do on behalf of our supplier partners because we manage that customer relationship, and then we take all of that off of the shoulders of our supplier partners.
“A marketplace tends to be a much more open forum, but it requires a lot more management on your part. And you have to get yourself [to stand out] amidst all of these other partners and prepare and stay competitive. Whereas in this model, we are managing all of those details.”
5 Key Takeaways
Here are five takeaways that Buelow and the panelists highlighted during the webinar in regard to e-commerce:
1. Successful e-commerce partnerships require ongoing investments from distributors in order to be successful. The level of investments in the digital capabilities, fees and staffing need to support business goals while also enabling competitive pricing and ROI.
“Ideally, you work with a partner that’s collaborative and allows you to focus on what’s most important for you. Then, you can focus on your core customers and those services and the value that an online transaction will provide,” Buelow said. “Then, your partner provides that supplemental channel to attract new customers and gain sales. But be sure you understand how you and your brands will be represented on that platform.
“Be prepared for both the financial and the human resources needed to support the work.”
2. Contrary to popular belief, e-commerce platforms don’t cannibalize distributors’ existing customer bases. Bearings & Industrial Supply Vice President Mamta Shah said on the webcast that having an e-commerce platform has given her company a nationwide reach.
“We’ve had orders coming from everywhere around the nation,” Shah said. “It allowed us to reach customers we would not have reached without an e-commerce platform. We’ve been in the business for over 30 years, but the customers are very different.”
With more orders coming in, a company such as Bearings & Industrial Supply can scale-up its operations in a more cost-effective manner to meet the increased customer demand.
3. E-commerce platforms bring the customers to companies, instead of waiting for a customer to find a company’s products by doing searches on the internet, or by accessing an open marketplace.
“We went live and all of a sudden the orders started coming in,” Shah said. “It’s not like where you keep knocking on a customer’s door to try to get an order. We are expanding and now we’re actually looking to bring on more people at our company just to keep up with it, which is a good problem.”
4. E-commerce companies are also able to generate product and ordering analytics that most smaller companies previously were not able to access. Buelow said Zoro does testing and beta work with Google in order to better understand Google’s search algorithms. The search engine development can propel customers’ products up to the top of a search page when a specific product or part is searched for online.
Companies like Zoro can also provide customers with detailed monthly reports.
“We’re able to draw what kind of product mix we have,” said AJ Bisceglia, head of operations for Main Filtering Inc. “That was a big concern of ours; ‘What kind of product do we have to keep on the shelf to satisfy this new demand, and this new avenue of customer?’
“As we kind of stepped into this, we’re able to pull that sales information, and determine ‘OK, this is the kind of customer we’re getting, and these are the kind of parts we’re selling to them,’ and that’s supplied back to us on the monthly reports.”
5. E-commerce has also illuminated the need to understand minimum advertised price (MAP), according to Buelow. E-commerce pricing is transparent, so it’s important that MAP policies are broadly enforced in order for everyone to compete fairly. The more widely MAP policies are used, the more effective they become, Buelow said.
“If you guys are out there trying to figure out if you should do it, my suggestion is yes,” said John Hedges, director of business development for Medart Engine. Hedges said without MAP, it was a “big race to the bottom” that would open up the opportunity for an aftermarket company to step in.
Listen to the complete webcast on demand by clicking here.