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Manufacturers Differentiate Distributor Support Based on E-Commerce Investment

And other critical reasons why e-commerce investment is the smart choice for nearly all distributors, from Channel Marketing Group's David Gordon.
e-commerce add to cart online shopping business technology internet concept.

In the words of a manufacturer that were echoed at a recent industry advisory council meeting, “COVID-19 has accelerated manufacturer and distributor e-commerce initiatives by three years.”

Further, more than 30% of distributor respondents shared in a recent survey conducted by Channel Marketing Group that their e-commerce activity (website visits and sales) was up. This is with 50% of respondents stating that their website is not commerce enabled.

Manufacturers are also investing more into driving sales via technology. They are spending more on digital marketing than ever before, investing in syndicating content to distributors who request customized content and, in some cases, manufacturers have personnel dedicated to supporting select customers’ e-commerce initiatives. What this means is that manufacturers are differentiating their support between those who have invested into digital initiatives and those who have not.

With this as a background, beginning, or accelerating, an e-commerce initiative is more critical than ever if you desire to grow your business long term.

We are not saying those who do not invest in e-commerce will go out of business. Their goals may be different – to continue to serve their local market, serve existing customers and make a nice living while supporting their employees. There is nothing wrong with this tactic if it is ownership’s goal.

For others, COVID-19 should be the starter’s gun to evaluate your e-commerce strategy.

What E-Commerce is All About

First, e-commerce is not all about a webstore and “hunt and peck” ordering. E-commerce is about helping your team, inclusive of your customers, electronically conduct commerce.

For distributors it is about:

  • Developing an omni-service approach, enabling your customers access to information how and when they want it.
  • Giving them access to robust product content to support their product searches, answer technical questions, download spec sheets to support their bids, providing access to supplier videos and so much more.
  • Embracing multiple electronic ordering platforms that your customers may desire, such as e-procurement and other system-to-system capabilities, inclusive of mobile ordering as well as text ordering.
  • Enhancing your sales outreach by embracing marketing the benefits of doing business with you digitally, highlighting your services and successes, and reinforcing products that add value to customers.
  • Having an informative website that has new product information, videos, customer service via chat, highlights your services and showcases how you have helped others profit.
  • And, if your ERP system is capable, it is about making access to account management services easier.

Additionally, depending upon your business model, it can enable the creation of new services that can help you to help your customers increase sales, enabling them to offer replenishment services.

The Supplier Perspective

For suppliers, e-commerce represents different opportunities.

Most suppliers have concluded that trying to disintermediate distribution via e-commerce is not a winner. While the allure of picking up a 20%-25% distributor gross margin is appealing, when they recognize the cost to pursue this business as well as the risk of what they would lose, practically all realize that it is not worth it.

Instead, suppliers are investing in:

  • Syndicating content to those who request/have invested into robust e-commerce offerings.
  • Working closely with commerce-enabled “preferred” distributors to develop special promotions.
  • Developing e-marketing content for e-newsletters as well as social media. Much of which can be co-branded with the distributor.
  • Expanding their channels to market to pursue customers who are choosing to purchase online or search for material. In some cases, this is sales driven; in others the primary goal is increased brand awareness and sharing product content.

The role of a supplier’s business strategy is to ensure that the company is visible where the customer wants to make a purchase. A sales organization devoted to a channel wants that channel to win. Senior management, however, needs to ensure that their company wins.

Supporting Technology and Content

For distributors, there are considerations regarding development of a technology stack to support e-commerce.

Assuming you have a “brochureware” website, the most basic next step is having an e-newsletter and perhaps a social marketing strategy (at least a presence).

Next comes identifying opportunities to commerce-enable your business or, at a minimum, offering an online catalog. Few distributors are generating a significant percent of sales via their website. Those with double-digit percentages are typically including other “system-to-system” capabilities. The key question here for most is, “Can the system integrate with my ERP system?” If it cannot, quickly and cost-effectively, then consider alternative solutions if an e-commerce system is a “nice to have” and not part of the longer-term strategy for your business.

And, as an aside, you probably do not know what business you are losing to others online because your sales organization is not asking, and most customers will not tell you. We recently conducted an online focus group for a distributor who was not doing much business online with the participants. Without the distributor present, all admitted that they buy online from the sponsor’s primary competitor as well as online distributors.

The most important part of your website is your product content (as basic site functionality is assumed). Whether you use BigCommerce, WooCommerce, ES Tech Group, Second Phase, or more expensive packages, they will accept an order. The key is building a robust presence powered by much content. After all, there is a reason why leading distributors typically have more than 150,000 SKUs on their sites.

You want:

  • Content direct from manufacturers.
  • As much content as you can get (none of this 80/20 stuff! Do you want to tell your customer, we only want to serve 80% of your needs for this project? Are you going to send them to your competitor’s website?)
  • Content that has all the suppliers’ available pdfs, images, videos, MDSD sheets, long descriptions, CAD, BIM and IES files (if applicable), and more.
  • The content sent to you to ideally be matched to your supplier list.
  • To easily ingest it into your e-commerce platform, so the data feed must be customized.

Consider product content as your virtual sales organization. It needs to answer customer questions when a salesperson is not available.

For suppliers, this means unleashing the power of your content to make sure that it is on as many distributor websites as possible.

Even with vaccines on the horizon, COVID-19’s impact will be lasting. Curbside pickup is here to stay. Customers recognize that they added hours to their day by no longer entertaining salespeople doing milk runs. Our comfort level, driven by experience in our personal lives, for searching for and ordering products online will remain. This, coupled with a desire for increased productivity and accuracy (hence system-to-system ordering) and generational workforce changes, means that the importance of e-commerce will only accelerate. If you want to grow longer-term, e-commerce needs to be part of your strategy.

David Gordon is president of Channel Marketing Group. Channel Marketing Group supports distributors and manufacturers with ideas that deliver result. One area is e-commerce strategy.

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