The fourth annual MDM distribution e-commerce survey conducted with Real Results Marketing revealed that the barrier to entry for e-commerce has lessened, but distributors are still deciding if they should launch e-commerce capability on their websites.
Part 1 of this series showed how the industry’s e-commerce offerings are maturing.
The fourth annual MDM distribution e-commerce survey, conducted with Real Results Marketing, revealed several key trends, including:
Distributors of all sizes have launched or are launching an e-commerce capability because the barrier to entry has been reduced. However, a significant percentage of these distributors are seeing very little revenue traction through their e-commerce site, even after several years.
Many distributors are still trying to determine if, not how or when, they will develop and launch an e-commerce capability. The reluctance is often based on an incorrect perception of how quickly the world is changing or outdated assumptions about the cost of entry.
While these trends appear to be conflicting, there is an underlying commonality between distributors that have launched with little growth and those unsure if they should develop an e-commerce capability at all: Both groups have a limited tactical view of what e-commerce does and how it relates to their businesses. In this tactical view, distributors view e-commerce as an ordering mechanism that is part of a cost center driven by IT. For the first group, this tactical view results in a passive approach to promoting the site or driving demand. For the second group, this tactical view reinforces a belief that, despite losing some transactions to e-commerce, they can retain the customer for other business in the branch or with a customer service representative.
The strategic view of e-commerce is of a shopping and ordering mechanism that is part of a profit center driven by marketing or a dedicated e-commerce division. The strategic view recognizes that shopping and buying trends are changing rapidly among all generations, not just millennials. It further recognizes that a distributor’s digital presence is increasingly becoming the first or the most significant impression a potential customer has. Distributors that have a strategic view of e-commerce place a big emphasis on ROI from demand generation through marketing programs and through the sales organization.
Marketing Vehicle Effectiveness and Spend
This year, the question on marketing vehicle effectiveness for driving e-commerce demand included field sales and customer service as choices for vehicles. The survey demonstrated that offline vehicles have a significant impact on driving e-commerce demand. Four of the top seven most effective vehicles are offline including sales rep, CSR, catalog and direct mail.
As shown in Figure 1, the sales rep is overwhelmingly considered the most effective vehicle for driving e-commerce demand. Customer service reps are considered second most effective and are comparable in effectiveness to email marketing. Email, catalog and SEO were the top choices in last year’s survey, and their order remains the same as last year.
While respondents consider SEO/organic search effective, they do not consider paid search effective. Of more than 100 distributor websites, fewer than 20 do much with paid search; it is a competency that most distributors develop as they reach the end of the nascent stage of e-commerce maturity. And, as with last year, marketing automation still plays no role for almost 90 percent of distributors.
Distributors spend the most to drive e-commerce demand through email marketing and catalog. However, in last year’s survey, direct mail was
third among the choices for spend and this year it is fourth, replaced by SEO/organic search. Mass marketing moved down to seventh this year from fifth last year.
The Integrated Marketing Approach
Though the survey showed the importance of offline marketing for driving e-commerce demand, many distributors make the mistake of assuming that since buying is digital, shopping must also be digital. This restricts the marketing vehicles to SEO, paid search and email marketing or marketing automation when other offline vehicles are relevant. (See Figure 2).
Real Results Marketing is performing a syndicated shopping and buying survey with several thousand end users from multiple distributors to answer four key questions relevant to an effective integrated marketing approach for e-commerce:
1. How do my customers shop (not order)? The aggregate data in the survey says that the most common shopping methods are:
- going to a manufacturer website.
- using search.
- going to a distributor website.
While distributors might take comfort that going to a distributor website is third among a list of 10 choices, they should be concerned that an end user is more likely to go to a manufacturer website. Distributors that want to be successful with e-commerce need to ensure that their own e-commerce site is a destination – rich with information that is easy to find.
2. How do my customers order? Among a choice of 10 ordering methods, the ones used most prevalently, in order, are:
- over the phone with a CSR.
However, the preferences of end users for a single distributor may vary significantly from the aggregate. For one distributor whose end users participated in the study, over the phone was by far the preferred method and in the branch was more popular than ordering by website.
3. How do my customers want to receive communication? Customers want to receive communication in more ways than distributors typically imagine. Most distributors project their own individual preferences as a consumer onto their customers and conclude that their customers don’t want email, phone calls or print mail. But our research shows overwhelmingly that a significant portion of customers is willing to receive such communications. In addition, more than 80 percent are willing to receive a print catalog annually or more frequently.
The aggregate trend is moving away from field sales toward more efficient mechanisms for communication, shopping and buying. About 35 percent of end users either never want a field sales visit or want one only once per year. Again, individual mileage does vary significantly: more than 90 percent of one distributor’s end users want a field sales visit at least monthly.
4. What ordering methods do my customers require to continue business with me? Many distributors assume they are losing some transactions as a result of having a subpar e-commerce site. Our research strongly indicates that many of these distributors are actually losing customers, not just transactions. It is imperative to find out what your customers require to do business with you. If they require good mobile ordering, you need to deliver that or you could easily lose 1 percent to 4 percent of your customers per year for the next several years.
Getting clear answers to these questions will deeply inform an e-commerce and integrated marketing strategy. Distributors must understand what their customers and prospects require to determine where the focus should be. The integrated marketing strategy will systematically grow revenue and retain customers who might otherwise find another supplier.
This survey was conducted and produced by MDM and Real Results Marketing and sponsored by hybris, an SAP Company.
About This Research
This research was conducted by Real Results Marketing with Modern Distribution Management. The research included an online survey taken by 415 participants across a variety of distribution sectors.
There was heavier participation from industrial, safety, electrical, electronics, building materials, janitorial, HVACR/plumbing and hardware. Other participating sectors include oil and gas products, pulp and paper, chemicals and plastics, grocery/foodservice and pharmaceutical.
Nearly 40 percent are small distributors with less than $50 million revenue, more than 30 percent are mid-market with $50 million to $500 million revenue, and 19 percent are large with more than $500 million revenue. Others did not disclose the revenue range.
About 30 percent are primarily focused on MRO, 12 percent are focused on OEM customers, 28 percent serve trades/contractors, 20 percent are an even blend of MRO and OEM, and 10 percent are in other categories.
While respondents were more satisfied with their company’s mobile-enabled sites and mobile apps, the satisfaction with website optimization for tablet and smartphones remained about the same as 2014. The Real Results Marketing Shopping and Buying Survey indicates that 35 percent of distributors’ customers consider optimization for tablet important within the next year. Forty-five percent consider optimization for tablet important within the next year. Forty-five percent consider optimization of the website for smartphones important within the next year. Some sectors of distribution are seeing 25 to 50 percent year-over-year increase in website visits and orders from a mobile platform.