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Distributors Go Virtual in 2017

Distributors Go Virtual in 2017

By Bridget McCrea

As business-to-business e-commerce continues to expand, electrical distributors are going to have to sharpen their pencils and rethink their strategies if they don’t want to get left behind.

Once looked upon as an online gathering place where consumers purchased a limited number of goods from merchants—or from one another via sites like eBay —e-commerce has rapidly morphed into a virtual trading ground for companies of all sizes and across all industries. This rapid evolution has forced organizations to find new and innovative ways to connect with and engage customers online—or stand by while those customers “clicked away” to the next nearest competitor.

As the volume of business-to-business (B2B) transactions being conducted online grew, those imperatives became even more important for wholesale distributors across the board. “Wholesalers and distributors have typically treated e-commerce as something of an afterthought,” writes Kym Ben-Ivgi in 10 B2B e-Commerce Trends for 2017.

“This is no longer the case. B2B sales are resolutely moving from the phone line to online, with sellers realizing that e-commerce can streamline and automate their sales processes, cut down on costs, reduce order errors, and free up personnel to work on more strategic issues,” Ben-Ivgi continues. “And, of course, by eliminating the 9-5 barrier, customers can order around the clock. Together, this all leads to higher margins.”

B2B is No Joke
Over the last few years, the volume of B2B transactions being conducted online has grown significantly. According to Forbes’ Predicting The Future Of B2B E-Commerce, 2015 worldwide spending on digital commerce platform software reached approximately $4.7B, attaining a 15 percent year-over-year increase. Gartner estimates that the digital commerce platform market will grow at a Compound Annual Growth Rate (CAGR) of over 15 percent from 2015 through 2020. Forbes also notes that Forrester estimates that B2B e-Commerce will top $1.1 trillion (versus $480 billion for B2C transactions) and account for 12.1 percent of all B2B sales in the U.S. by 2020.

Based on these predictions, it’s obvious that no electrical distributor can afford to ignore e-commerce or hope that it will somehow “go away” and that business will return to “normal” anytime soon…if at all. “B2B buyers, now accustomed to placing online retail orders, are shifting their business buying habits (and expectations),” writes Thinkwrap Commerce’s Alyssa Hanson in The current state of B2B eCommerce (and why you can’t afford to ignore it).

“89% of B2B buyers perform everything from product research to price comparison to post-purchase support online,” Hanson points out. “Without the limitations imposed by traditional B2B buying methods, buyers can (and do) place orders anytime, anywhere, and from any device. In fact, purchase rates on mobile were up 22% [in 2015], over figures from 2013.”

Put even more simply, B2B e-commerce is no joke. In fact, electrical distributors that haven’t taken this buying trend seriously could find themselves in serious trouble in 2017. “In terms of electrical distributors investing in e-commerce, there’s still a ton more work to do,” says Justin King, a senior partner with B2X Partners in Ashburn, Va., and founder of e-commerceandB2B.com. “The good news is that we’re seeing a lot of opportunity out there for distributors to step up to the plate and develop e-commerce platforms that truly allow them to connect with and serve their customers online.”

On a positive note, King says that in 2016 he noticed a larger swath of electrical distributors taking an interest in e-commerce and taking the necessary steps to not be left out of the online selling game. “The activity level was higher than I’d ever seen before,” King explains, “with more distributors actually making moves in that direction versus just asking themselves if they need to get into e-commerce.”

And unlike the first or even second wave of e-commerce sites, King says the platforms that were rolled out in 2016 (or, that are set to launch during the year ahead) are based on a more calculated, well thought out approach. In other words, companies aren’t just throwing up virtual storefronts and hoping that their customers find and use those B2B opportunities. For example, King says some are taking the “Digital Branch” approach and looking more carefully at what goes into building a physical store—and then using the same strategies to build out their online homes.
As a first step in that process, King says electrical distributors should put together a list of objectives and goals (e.g., how much revenue you want to generate online, what type of gross margin you expect, which staff members should handle the e-commerce initiative, etc.) to work from when developing the platform. “If you were going to open a physical branch you’d start with the planning process,” King reiterates. “The same care and attention should be given to your e-commerce presence.”

From there, King says distributors should fill their e-commerce sites with inventory not by thinking about the physical nature of those products, but instead by the data associated with those items. “Because a customer can’t walk into a digital branch and pick up a product, it’s all about the product data itself,” King explains. To ensure the best possible customer experience online, ask yourself questions like:  What type of product is it? Do we have the right product data for it? Are we using good descriptions? Are we using photos and videos? Do we have good coverage across all of our products and product lines?

With those questions answered, King says distributors should view their e-commerce sites as another branch by putting the right level of time, effort, and investment into its development. “Much like you’d build out, stock up, and staff up a physical location,” says King, “you should give the same attention and care to your virtual branch.”

The Company That Kills You
Looking ahead, Pepperi’s Ben-Ivgi sees significant opportunity for companies that grab e-commerce by the horns and use it to more efficiently serve their customers.  
“E-commerce in general has eliminated the need to visit a store or speak to a sales person only when the business is open. It is a way to increase sales, customer satisfaction, and loyalty, while finding new markets and serving customers easily and efficiently,” writes Ben-Ivgi.

“The exact same benefits extend to B2B e-commerce, but its impact on the economy will be that much more substantial because the flow of B2B products around the world far surpasses that of B2C sales.”

As more distributors put time and effort into grabbing their pieces of the B2B pie, King offers up this tip:  Pay less attention to what your seemingly-direct competitors are doing in the space, and more attention to the unknown competitor that could be lurking around the next corner online. “The company that kills you will look nothing like you,” he points out.

In other words, worry less about the guy up the street and more about the person who’s working out of his garage, completely re-thinking the customer experience. Or the private equity firm that invests $10 million in a company that’s focused on creating a great experience for the electrical distribution customer. “If I were running a distributorship,” says King, “that’s what I’d be concerned with in 2017.”


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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