By Bridget McCrea
With B2B e-commerce numbers on track to hit $1 trillion over the next four years, now is the time to shore up your distributor’s online selling strategy
Scott Costa couldn’t believe his ears. While he already knew that many electrical distributors face challenges in the e-commerce and online sales arena, he cringed when he heard the NAED member at a recent conference mention that 2.5% in e-commerce sales was a good return on the firm’s online investment. “He said that his e-commerce sales were at a ‘tipping point,'” recounts Costa, tED magazine’s publisher. “I thought, that’s not a tipping point; that’s not even getting started.”
Working in an industry where many firms think that 97.5 percent (give or take) of their sales still need to come from in-person, paper-based transactions is both frustrating and exhilarating for people like Costa, who know full well that most consumers – and a growing number of business-to-business (B2B) customers – buy via their computers, laptops, tablets, and/or cellphones. As these devices continue to proliferate, and as consumers become more and more comfortable shopping online, expect to see an increasing number of your B2B customers following suit.
And if you’re still not convinced that the electrical contractors your distributorship have been working with for the last 20+ years are going online to research and buy products and services, consider these sobering statistics from Forrester. In its US B2B eCommerce Forecast: 2015 to 2020 report, the research firm forecasts U.S. B2B e-commerce to grow from $780 billion in 2015 to $1.13 trillion in 2020. That means that within five years, e-commerce will constitute 12.1 percent of the total $9.39 trillion B2B commerce market in the U.S.
Forrester attributes the growth to several factors, including changes in B2B buyer preferences, the opportunity for B2B firms to reduce the cost to serve their customers, and the value of building loyal multichannel B2B customers. Right now, for example, 74 percent of B2B buyers already research at least one-half of their work purchases online, according to Forrester. In addition, 30 percent of today’s B2B buyers complete at least half of their work purchases online. “With that percentage nearly doubling to 56 percent by 2017,” Forrester’s Andy Hoar writes, “B2B sellers will see a significant volume of offline business move online in the next few years.”
Case in Point
Mike Connors, CEO at Bulbs.com, is no stranger to e-commerce. He also understands that many industrial distributors have been reluctant to put the investment, time, and energy into turning their own websites into selling machines. “Distributors have been shut up in their own houses for a long time,” says Connors. “Their delivery and value-added capabilities are strong, but they’re being held back by leaders who haven’t adopted modern technological capabilities.”
Knowing this, Connors says he wasn’t surprised to hear that many electrical distributors are choosing to ignore the threat of Amazon Business (read about it here, What Distributors Really Think About Amazon Business), instead of standing up to the oncoming threat. “A lot of them are saying, ‘Well, Amazon hasn’t even made any money yet,'” says Connors. “The thing is, it still has a massive market capitalization and a lot of resources to keep trying.”
In many cases, Connors says distributor pushback comes in the form of: “We’re not sure we want to sell on the Internet.” For many, he says a loss of control, a cheapening of their products, and less oversight over pricing factor into that decision. “They think that e-commerce companies are just blindly dragging prices down because that’s the only way to compete online,” says Connors, who points to The Home Depot and Staples as two bricks-and-mortar firms that have managed to harness e-commerce as part of their business models. Home Depot’s quarterly online sales topped $1 billion for the first time during the first three months of the current fiscal year according to the National Retail Federation, and Staples posted $10.9 billion in online sales in 2014, according to Internet Retailer, up from $10.4 billion the previous year.
Many other companies have followed similar paths into the online world – proving the fact that traditional business models don’t have to be upended in order to get a piece of the $1 trillion in B2B sales that Forrester is projecting by 2020. “I just sat with about 25 profitable e-commerce retailers of all sizes at an e-commerce board meeting in August. Everyone from top-tier electronics retailers to smaller firms like ours were there,” says Connors. “Why were they there? Because they’re making money online.”
Kicking it into Gear
It’s one thing to talk about how companies are making money online, but actually implementing and benefitting from their e-commerce strategies is a completely different animal. According to Jim O’Rourke, director of supply chain solutions at HAVI Global Solutions in Downers Grove, Ill., distributors should start by looking closely at how they currently interact with their customers. Are the electrical contractors really coming into their stores to purchase goods every day? Are they calling from the jobsite to place orders? Are they using their mobile phones and iPads to do research online before making the call? Are they completely digital and interested in researching, ordering, and checking up on orders online? Are there customers on your roster that would be doing more online if your website was up to speed, accurate, and on point?
The answers to these and other questions will help you shape an e-commerce strategy that truly answers your customers’ needs. “Look at your business-to-business interactions and determine which of them can be (or, already are) centered on the online channel,” says O’Rourke. Taking this step can not only help distributors enhance their online sales, but it can also alleviate some of the cost and time that goes into managing the customer relationship. “When you can automate processes and put functions like ordering and shipment status checks online, you remove transaction time from the order placement, processing, invoicing, and related functions.”
It’s All in the Data
To get the most out of their e-commerce investments, distributors also need strong data foundations that allow customers to access real-time point-of-sale and inventory data online in a 24/7 environment. Somewhat of a pain point for electrical distributors – who struggle with the task of getting this data from their own suppliers – this focus on data helps companies better execute their B2B e-commerce strategies, says O’Rourke.
“When we talk about e-commerce in the distribution context, it really starts with a solid data foundation,” says O’Rourke. “Once you have the data in place and ready for your customers to access and use, you’ll have a tool that can turn the information into executable orders.”
Ian O’Brien, chief solutions officer at B2B solution provider Four51 in Minneapolis, calls managing product data in the distribution industry “complicated,” namely because distributors work with thousands of manufacturers (and vice versa). To deal with this, he says the industry is becoming standardized with industry-wide data exchanges such as IDEA, which provide a centralized repository of manufacturers’ product data. “Distributors can then use B2B e-commerce solutions, to provide real-time integration with these industry-wide data exchanges,” says this person. “This saves both manufacturers and distributors time and effort; with manufacturers managing one set of data and distributors ensuring product information in their e-commerce system is accurate.”
Getting into the Act
Acknowledging the fact that many independent distributors still view e-commerce as a single-digit sales channel, Richard Watson, HAVI’s senior manager of business analytics, says now is the time to turn that tide and start catering to today’s digital-savvy customers. “Your customers are going to continue marketing towards reacting digitally with brands,” says Watson. “They want to be able to get information when, where, and how they want it. Going forward, distributors will have to shift faster and be even more flexible to accommodate that demand.”
Distributors simply need to get started, says O’Brien, or risk getting left behind. “Online sales will continue to increase and Millennials will continue to overtake the workforce,” says O’Brien. “Your best bet is to find a B2B e-commerce solution that is able to grow with your business and respond to your unique, changing needs. Take the first steps to move online before it is too late – then watch your opportunities expand.”
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McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.
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