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Building Your Digital Branch, One Block at a Time, Part I

Building Your Digital Branch, One Block at a Time, Part I

By Bridget McCrea

Online B2B e-tailers like Amazon Business are putting their best foot forward online…is your distributorship doing the same?

Speaking to an audience of wholesale distributors at the recent NAW Executive Summit, Amazon Business’ Director and GM Rob Green threw out the question, “How many people here use Amazon?”  Nearly every hand in the room shot up, with the exception of about three (or so). “Sure, these executives think Amazon Business is a foe, but they also use that foe’s giant parent company in their personal lives,” tED magazine Publisher Scott Costa writes in Amazon Business Takes Center Stage at NAW Executive Summit.

“Keep in mind, there weren’t a lot of millennials in the room,” Costa continued. “These were baby boomers and Gen Xers. Green pointed out that’s one of the many reasons Amazon Business is so successful. Then he said something along the lines of, ‘You know what you are capable of when it comes to e-commerce, but you don’t accept the challenges in your business.'” 

Right on the Money
Green is right, and few electrical distributors can deny it. With the tagline, “Everything You Love About Amazon, For Your Business,” Amazon Business is taking market share in an arena that just a few years ago looked to be unconquerable. After all, how could an online e-tailer possibly compete with an independent distributor that has literally spent decades honing its offering around sales support, technical support, product knowledge, and strong ties to the makers of the products that it sells?

The answer is simple:  Price, delivery times, and many of the same brands that today’s distributors stock on their shelves and/or in their warehouses. And if you don’t believe it’s coming true, consider this: A good friend of mine sells software and systems to the material handling industry. As part of his company’s “overall package,” he sells the rechargeable/exchangeable battery packs that end users rely on to run the carts (which are used to pick and pack orders in a warehouse or distribution center setting).

“You won’t believe this Bridget,” my friend lamented, “but my client just bought 200 of those battery packs—same exact brand and model that we sell—for $50 each, with free 2-day shipping (via Prime). And we’re buying them for $60 (through a distributor) and marking them up to about $150. There’s no way we can compete with that price, even if we wanted to.” The bottom line is that by doing some research on a website that the buyer was probably already using for B2C purchases in his daily life, he saved his company $20,000. Guess who got the order?  

So in a world where companies like Amazon Business are raising the bar on price, selection, deliverability, convenience, and confidence purchasing online, what can electrical distributors do to stay out in front of the game and ensure their survival? In a world where the “technical knowledge and support” argument only goes so far, Justin King, a senior partner with B2X Partners in Ashburn, Va., and founder of e-commerceandB2B.com, says the first step is to look at your e-commerce strategy not as an adjunct to your existing business, but as a completely different entity.

“A lot of companies are still referring to their e-commerce sites as their ‘web stores,’ when in reality they need to go beyond just looking at online sales as ‘side businesses,'” says King. If Amazon Business’s inroads on the B2B side aren’t enough to push distributors to rethink their e-commerce positions, consider this:  According to a Forbes prediction, B2B worldwide will be worth $6.7 trillion by 2020. And Forrester Research  expects the U.S. portion of B2B e-commerce to reach $1.132 trillion by 2020 (for 2017, year-on-year growth hit 9.2 percent and brought the annual total to $928 billion). 

Electrical distributors that want to get in on the B2B e-commerce action—and haven’t already made their own inroads in this arena—can start by building what King calls “digital branches.” Much like a physical branch, which requires a location, a viable customer base, staff members, inventory, and return on investment (ROI) potential, he says a digital branch should factor in all of these elements (and more).

“You wouldn’t pick out a new building without first understanding who your customers were going to be, how you were going to staff it, and what kind of inventory you should stock,” says King. “Yet, when it comes to e-commerce, a lot of distributors view it as a ‘side store’ adjunct to what they’re already doing.”

Getting Up to Speed
King says he’s always shocked to hear distributors say things like, “We have an e-commerce department” or a “That’s handled by our e-commerce group.” You don’t have a phone group manning the phones and the technology behind those phones, he points out, so why would you have a separate e-commerce approach?

E-tailers like Amazon Business use a decidedly different style. “They see e-commerce as a strategic, competitive advantage in the business because it is their business,” says King. Citing a recent UPS Industrial Buying Dynamics study, he says a lot of electrical distributors may be surprised to know that website usability can literally make or break a sale. “The majority of respondents (72 percent) in the U.S. said they were very likely or somewhat likely to jump to another distributor’s website if the latter was more user-friendly,” says King, “and that they would then shift more of their spending to that new distributor.”

In the same study, UPS pointed out that 64 percent of buyers in the U.S. are now purchasing directly from manufacturers—a trend that is expected to increase. And while buyers are increasingly buying industrial supplies online, UPS also found that “difficulties in identifying product details” and “getting answers to product-related questions” rank as some of the top barriers to online purchasing. Findings from the U.S. and Europe revealed similar gaps in service.

“Beyond price and quality, purchasers are demanding far greater value from distributors,” UPS writes. “Distributors can help purchasers create supply chain efficiencies by consolidating orders with a single carrier or offering a range of shipping options to help purchasers manage urgent deliveries.”

Take Your Head Out of the Sand
Whether electrical distributors put their best foot forward online in 2017 is still up in the air, but one thing is for sure:  sequestering e-commerce off into the corner and hoping online behemoths like Amazon Business don’t take too much B2B market share is not a good strategy.

“It’s time for distributors to view e-commerce as a strategic initiative, and not just a tactical one,” says King. “It’s not about pricing and it’s not even about your site’s search capabilities. It’s about creating a complete, user-friendly online digital branch that plays well with everything else you do as a company.”

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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