2018 Distribution Disruptors
Insite Software breaks down the top five trends impacting the distribution industry in 2018.
5 Disruptors for Distribution
The rate of change within the distribution industry is accelerating, and nowhere is this change happening faster than in the world of commerce. The impacts caused by rapid advances in technology, combined with evolving customer expectations, may create headaches for some distributors in the coming year. But for others, these disruptive influences could transform into major opportunities.
The commerce experts at Insite have created a list of the five major disruptors most likely to impact the distribution industry this year. In this white paper, we’ll explain how to absorb each disruptive influence, incorporate it into an effective plan, and deliver the strongest commerce experience possible for the customer, the organization, and every person involved with the buying cycle.
To meet the complex demands of the industry, distributors must pay attention to the following disruptors:
- Greater Post-Purchase Expectations
- Fully Functional Mobile Applications
- Demand for Pricing Transparency
- Mega Cloud Distributors
Unified Commerce EnvironmentsUnderstanding and adapting to these disruptors will supercharge distributors’ digital transformation journey and keep them ahead of the competition. The goal of commerce is to make the customers’ lives easier by providing the most efficiency at the lowest cost of sales. Incorporating these disruptors into distributors’ 2018 strategy can help them do just that. Read on as the experts at Insite unpack each of the disruptors and how distributors can transform them from challenge to opportunity.
Direct to Customer
Although it may seem odd to begin by talking about the transactions that occur at the end of the buying cycle, managing post-purchase expectations within B2B commerce environments represents one of the largest areas of change, and opportunity, for distributors in 2018.
For B2B buyers the customer experience post-purchase is perhaps even more complex than pre-purchase. Personal, B2C online experiences continue to drive professional buyer expectations, making the implications of poor support even more serious.
Losing a longstanding customer due to a glitch in an online experience is a distributor’s worst nightmare. The good news is that supporting customers post-purchase is easier with the right mindset.
In this section we break down some of the components of digital commerce to strengthen this aspect of the buying cycle:
- The Concept of B2B Omnichannel
- Increasing Efficiency and Improving the Bottom Line
- Growing Share of Wallet
- Building Trust and Loyalty
The Concept of B2B Omnichannel
To really understand how post-purchase activity impacts the commerce cycle, it’s important to acknowledge that customers are engaged in an omnichannel experience. That means information has to be shared, not siloed. Too often distributors’ eCommerce solutions are not connected to legacy backend systems. If the information isn’t shared, efficiency, or even an important customer, may be lost as orders are manually (and often poorly) tracked across disparate systems.
To deliver a fully unified commerce experience, the eCommerce platform must be viewed as what commerce experts have deemed the “single source of truth” across every aspect of the buying cycle, from the order to fulfillment, to returns.
The B2B buyer’s journey may be multi-touch, but it still needs to be smooth whether a task is occurring online or through traditional sales channels. Nowhere is this more important than after the purchase has been made. The good news is that if a problem is resolved quickly, research shows that most customers will return to buy again. A strong B2B omnichannel experience, where information is shared across all roles and channels, can help ensure that even if there is a problem, it can be handled promptly and efficiently.
Increasing Efficiency and Improving the Bottom Line
Once the organization has embraced an omnichannel philosophy, distributors must recognize that relationships within B2B commerce are built across multiple channels as well. That translates to one of the largest opportunities to increase efficiency and improve the bottom line during post-purchase activity.
The omnichannel experience requires consistency no matter where or how the customer is engaging with your organization. Once critical components like fulfillment and other logistics are brought into the unified commerce ecosystem, it’s possible to add even more efficiency and value at this stage.
Where can mobile, for example, add value by providing a photo confirmation of delivery? Can 2-hour or same day delivery be achieved by sharing data between systems?
Karie Daudt, VP of Marketing and Customer Experience
Growing Share of Wallet
Although the primary goal of a distributor’s eCommerce solution is to increase efficiency and drive down cost, post-purchase experiences present opportunities to grow revenue.
Analytics and other behavioral information provide the foundation for easier reordering systems and other digitally-prompted, revenue-generating transactions. Automatic promotions based on customer data can help cross-sell and upsell after an initial transaction is made. Personas and profiles also help determine which high-value customers should receive personal attention, while others are focused on building trust primarily from a digital perspective.
Using analytics to prescribe unique post-purchase activity based on the potential value of the customer represents a huge opportunity for organizations as they once again embrace a multi-touch buying journey.
Building Trust and Loyalty
Solid B2B omnichannel execution transforms into stronger customer loyalty. While recent surveys by Bain & Company show that on average 68% of B2B customers are less loyal than they used to be, we feel that’s because loyalty has been redefined as distributors experience digital transformation. In a unified commerce environment, trust must be built digitally – it doesn’t happen over lunch. A reliable buying experience is one less headache for the customer. Ease of execution is the avenue toward loyalty and trust, and a large portion of that happens post-purchase.
Along with making the process easier, there comes the need to personalize post-purchase experience as well. The analysts at Forrester said it best when they encouraged B2B marketers to develop a post-purchase plan that features rewards that incentivize and reinforce desired behavior. Here is where transactional and behavioral analytics can provide the keys to delivering incentives and benefits that return the customer to the beginning of the buying cycle over and over again while increasing the value of that cycle each time it reiterates.
Customer adoption of new eCommerce sites continues to be a problem for many distributors. Although Forrester Research has predicted that sales from B2B eCommerce will amount to $1.2 trillion in the United States by 2021, many B2B eCommerce sites are failing to meet their goals.
At Insite, we believe a large contributor to this issue is a misunderstanding of the definition of “mobile” within the B2B commerce cycle. Put simply, a responsive website is not enough. A strong mobile strategy requires going past responsivity to accommodate nearly, if not all, B2B commerce activity at the device level. For customers that means delivering an optimized user experience for greater efficiency, multiple channel accessibility, and fast payments, among many other mobile needs.
In the past, price and technology have placed huge obstacles in the way for mid-sized distributors seeking to provide a robust mobile experience. But things are clearly changing, making mobile a huge disruptor for distributors in 2018 for three primary reasons.
- Users are demanding a rich mobile experience
- The productivity gains experienced from a high functioning native app can provide extraordinary value
- The cost of building these robust mobile experiences has dropped significantly
Customer Demand for Rich Mobile Experiences
Customers are demanding nearly 100% functionality for every device they’re using. In January of 2017, eMarketer reported that 84% of millennials considered their mobile device essential to their work, with Gen X (aged 36-51) not far behind at 76%.
As Boomers leave the distribution industry workforce, reliance on smartphones and mobile devices to do just about everything personally and professionally will continue to increase. And it’s not just a generational trend.
Both research and our empirical observation show that the use of mobile technology within the B2B buying cycle, including during post-purchase activities, is rapidly becoming a larger and more important part of the customer experience. Distributors who stop at responsivity are going to lose customers if they don’t respond to this demand.
Build Competitive Edge Through Productivity and Efficiency Gains
The primary goal of any eCommerce solution should always be to make the B2B commerce environment, and the people utilizing it, more efficient. Distributors who aren’t factoring mobile into their strategy are ignoring the ways in which mobile technology can transform how people work in the field, leading to incredible efficiency gains as well as reduced cost of sales.
Native mobile apps for B2B eCommerce should require capabilities like user-specific rich product catalogs, specific pricing and product recommendations, and sophisticated order and re-order capabilities. Although targeted functionality is important, the more critical need for mobile functionality is to personalize the experience for the individual user as it relates to their unique workflow. For example, does the foreman on a job site need to know when their delivery will arrive? Are there specific items that a plumbing contractor might need to add to their purchase list that day? As we explained earlier, post-purchase expectations may be high, particularly where returns and exchanges are involved. The mobile app must be fully functional, but also be smart, and integrated with all transactions occurring across the digital and offline B2B commerce system.
In this way mobile technology provides a bridge to a unified commerce experience so that no matter where the worker resides, they have access to the unique data and personalized information they need quickly and on demand.
Robust Mobile Capability Out of the Box
Providing a rich mobile experience is no longer a six-figure endeavor. Configurable native mobile apps are becoming a bigger part of B2B eCommerce solutions. Providing mobile capability out of the box eliminates the expensive design, development, and upgrade costs associated with custom development.
Distributors need to ensure their solution incorporates the primary needs of a mobile user not only from an experience perspective but from a data perspective as well. Just like the rest of a unified commerce environment, users on their mobile devices must have access to backend data from every relevant enterprise system. That data also needs to be available offline, when the sales or service representative is remote.
Tom Frishberg, VP Engineering
Pricing as a Transformative Tool
It’s not a secret that price transparency is creating havoc for many distributors faced with competing against annoying popup sites, and manufacturers positioning themselves for direct sales. Despite what may be a decades-long business relationship, distributors are increasingly presented with cheaper prices their customers have found through simple internet searches. This will impact negotiations with existing customers who might be considering a new product category or hurt relationships with new customers who may have seen lower prices elsewhere.
Highly optimized, smaller sites that simply present products at extremely competitive prices without a lot of added value are putting pressure on distributors to meet or match these prices without any consideration for overhead. The ability of customers to search quickly for specific products has created a disruptive influence that is driving down profits as distributors attempt to compete.
Bigger distributors like Grainger have even announced “bottom” pricing strategies that reduce profits in the short- term in an attempt to gain more business and increase revenues overall in the long run. Experts remain divided on whether this will work.
Another aspect that adds more impact to this disruptor is the reliance so many distributors have on complex, manual pricing mechanisms. Distributors without the ability to rapidly update pricing on public sites, and configure customer contract pricing quickly, will lag behind the competition.
Steve Shaffer, CEO
Adopting this new mindset and focusing on key performance indicators can actually turn pricing transparency into a transformative tool that strengthens the B2B commerce cycle. The three KPIs to focus on are search, conversion, and customer value.
A major benefit to the digital transformation of the B2B commerce cycle is that previously unknown, new customers can find a distributor based on organic search. This turns price into an entirely new customer acquisition channel with a fairly low cost. A truly unified commerce cycle will then make those new customers available to sales and service representatives who can nurture the relationship into a more substantial opportunity. Providing price transparency for some strategically chosen, highly optimized products can attract new business organically as more researchers go straight to the internet to find their information. Optimizing the public portion of a distributor’s commerce site for certain prices, and keeping those prices updated dynamically can help make pricing transparency work for a distributor by providing strong inbound traffic benefits. To be an effective tactic, however, the commerce platform must be able to handle the complexities of B2B pricing mechanisms.
A unified commerce environment will provide 24/7
access to real-time information that supports a B2B omnichannel experience. At any time a customer may leave the self-service experience, pick up the phone or online chat, and expect a company representative (most often the salesperson or CSR) to know every single action they’ve taken. Pricing is a key part of this “hybrid” model as customers move between a self-service and a full- service experience. Pricing that is public can drive strong conversions to more robust business, but only if the full service and self-service experiences are fully integrated. Inbound traffic in the form of potential customers, and more importantly the behavior of the users engaged with the commerce site, can be used to develop new lead generation tools or to determine whether it’s time for a sales rep to intervene and nurture the process with a larger customer opportunity. Once again, however, the commerce platform must be able to handle the B2B buyers’ journey, and the numerous roles involved within a transaction.
When it comes to popup sites or tiny companies that provide rock bottom prices, there is a larger cost to the customer service. A unified commerce solution that is integrated with enterprise systems can provide correct, real-time pricing and promotion information for each unique customer account. And that accuracy for distributors’ customers is often much more valuable than an actual price discount.
Positioning pricing transparency as a competitive advantage requires a change in mindset, but it also requires the right technology to support the necessary mechanisms in a unified commerce environment. In the end, distributors need to remember that the real goal of B2B commerce should be to drive efficiency. The resulting reduction in the cost of sales and the increase in perceived value in the mind of the customer will usually offset the challenges caused by pricing transparency.
Cloud-Based B2B eCommerce
Cloud-based B2B eCommerce solutions are rapidly becoming more robust and less expensive. As the technology landscape evolves, the trend toward distributor marketplaces in the cloud is accelerating. This disruptor is quickly changing the face of the industry. Lesser known distributors with the most advanced cloud-based marketplace strategies have an opportunity to finish this year as industry leaders, leaving larger distributors in the dust.
Although major distributors initially created the first set of “mega” marketplaces, many smaller distributors are taking advantage of lower cost cloud-based B2B eCommerce solutions and coming together to create collaborative, robust marketplaces of their own.
One example would be distributors that service the contracting industry. An electrical supply company might team up with a lumber wholesaler, plumbing and heating distributor, and other complementary distributors to create a new marketplace as a “one-stop shop” for the contractor customer. This allows each member of the marketplace to provide their unique set of products while expanding their overall reach.
Together these smaller distributors are able to reach new customers and markets while expanding their share of wallet at the same time. It also puts them in a position to compete with larger distributors and even Amazon.
Complexities of B2B
Cost is an important component for smaller distributors, but creating the right strategy for a strong online commerce experience means investing in the right platform. Robust B2B cloud-based software must not only create a strong customer experience; it must provide fully supported, native B2B capability out-of-the-box whenever possible. Cloud-based distributors need to handle the complexities of B2B commerce including:
- Content that is targeted to the personal experiences of individuals and the organization
- The ability to customize controls for quotes, budget, and approval workflows
- Complex catalogs including customer-specific products, contract pricing, and local inventory
- Ease of integration with backend ERP and PIM systems
- A configurable, fully functional mobile app
Hybrid Nature of B2B Commerce
The right strategy for this disruptor takes into account the unique, hybrid nature of B2B commerce. Although more of the buying process is driving toward self-service, the complexity of the B2B industry means that a customer may need personal service at any time. A distributor needs to be able to handle those offline requests for help with full knowledge of every transaction that has occurred before.
Integration with distributors’ complex enterprise systems, a strong CMS, and a fully functional mobile app are absolutely required to deliver that unified commerce experience B2B buyers expect, particularly in a cloud-based marketplace.
As the B2B buying cycle becomes increasingly data-driven, marketplaces are delivering value to the bottom line from this perspective as well. Robust, cloud-based marketplaces provide not only a wide span of products, but more data to help accelerate the buying cycle through stronger personalization. They also deliver data that is invaluable in the form of lead generation opportunities for both the distributor and manufacturers.
One thing is quite clear. Without providing more value, distributors will lose business to both direct sales for manufacturers, and to smarter distributors creating these enhanced marketplaces. A strong marketplace strategy using the right cloud-based platform could be a make-or-break deal for many distributors in 2018 and beyond.
The Case for Omnichannel
In an August 2017 report entitled “The Case for Omnichannel B2B” research firm Forrester makes some strong points regarding the new B2B buyer. Companies need to offer buyers a spectrum of buying options, from self-service, to full service, to the most frequent scenario, a hybrid, omnichannel commerce solution.
As we’ve discussed, at any time a customer may leave the self-service experience, pick up the phone or open an online chat, and expect that the company representative knows every single action they’ve taken. In other words, customers are not only expecting a hybrid sales and service experience, but they’re also expecting that experience to be entirely personalized to their current and previous history. That requires a fully unified commerce experience.
Although this seems like a no-brainer, it’s problematic for many distributors who once believed that eCommerce would replace field sales and that everything would be self-service. The predicted “death of the B2B salesperson” never actually happened, but it impacted the adoption rates of many new eCommerce solutions. Salespeople will always be the ones to onboard customers to the new digital solution. If they view that solution as competition, or worse, if the solution is a poorly designed site without any integration, they will not want to introduce customers to the self-service option. In fact, adoption rates are often as low as 5% when faced with these kinds of impediments.
Tim Sobocinski, VP of Sales
No customer, or buying cycle, is exactly the same in B2B. Low-value transactions are often the easiest to support digitally but even those require custom catalogs, varying location requirements, and precise re-order and return capabilities. No matter the transaction, B2B customers often drop in and out of self-service, but their demands for assistance must be met by salespeople or CSRs with full knowledge of their complete buying history.
The Need for Unified Commerce
What we know is that the need for a hybrid model – which we really believe is actually the need for unified commerce – is impacted by not only customer demands but by technology and the sales engine as well. Customers will leave if their full-service needs are not met and if the post-purchase experience is not strong.
Yet an omnichannel marketing strategy is not enough and it’s not just about a hybrid buying experience. Distributors need to go beyond marketing and buying processes to create B2B commerce environments that are truly unified. To understand how to work toward this vision, it’s important to know what a unified commerce solution really looks like.
First, when a commerce experience is unified, customers move easily between digital and human interactions. No matter how they engage in the buying cycle, or where they jump out of a self-service process, the sales and service representatives involved are fully informed.
Information is accessed and synchronized real-time from enterprise systems so that crucial aspects of B2B commerce like specific pricing and promotion agreements, custom catalogs, re-order information, and even returns can be processed flawlessly. Problems must be solved quickly without causing further frustration with the customer. Mobile capabilities are fully functional and map to the unique needs of the user based on job requirements, product needs, and any other characteristic of that particular role within the organization. Sales and customer service reps are empowered with the current and correct information they can access 24/7. That has to happen any time in the buying cycle, from providing the latest marketing information to help them be truly consultative before the sale occurs, to supporting the customer post-purchase with any problem or need that might arise.
The point is not to develop the “best” omnichannel marketing strategy. The real opportunities in meeting the need of this hybrid buying expectation are reducing costs and increasing efficiencies. At Insite, we believe that strong B2B commerce environments should accelerate the productivity of every single person involved in the buying experience. That can only be achieved with a unified commerce environment.
In order to stay relevant and competitive in the eCommerce space, be sure your 2018 commerce strategy plans for the disruption we’ve covered in this white paper:
Greater Post-Purchase Expectations
- Identify the opportunities in post-purchase experiences for growing revenue, increasing efficiency and improving the bottom line
- Build digital trust through a reliable buying experience and personalize post-purchase experiences by incentivizing and rewarding desired behavior
Fully Functional Mobile Applications
- Utilize out-of-the-box, configurable mobile apps to stay ahead of the competition
- Meet and exceed customers’ expectations for rich, personalized mobile experiences
Demand for Pricing Transparency
- Turn pricing transparency into a transformative tool that strengthens the B2B commerce cycle
- Use analytics to provide valuable information about inbound traffic generated by pricing transparency
Mega Cloud Distributors
- Choose a solution that boasts the capabilities required for the unique, hybrid nature of B2B transactions and integrates with ERP and PIM systems
- Reach new markets and customers and expand your share of wallet with a solution deployed in the cloud
Unified Commerce Environments
- Enable your sales team to transform their roles to meet the demands of customers’ needs for a hybrid commerce model where they can self- serve and full-serve
- Know all the information about your customers across the entirety of the buying cycle, from online to offline
- Accelerate the productivity and efficiency of every person involved in the buying experience from your sales team to your customers
What’s changing in distribution? How do distributors address the disruption to come? Ian Heller shares his best tips for distributors facing challenges like commoditization, advanced technology and a new generation of workers.
A lot goes into handling product data effectively. Here’s how distributors can obtain better data, measure its quality and ensure it’s eCommerce-ready.
Learn about 6 manufacturers and distributors getting eCommerce right