E-Commerce: Invest Now or Pay the Price Later

The time to invest in a viable e-commerce strategy is now, not when the economy takes a dip and leaves your company with fewer resources and more competitors.

As electrical distributors in the U.S. try to figure out the right formula for e-commerce and the best way to compete against online sellers like Amazon, it may be comforting to know that distributors “down under” are grappling with their own e-commerce demons right now. “Amazon is coming to Australia with low prices, vast selection, and fast delivery,” Amazon Australia’s Ahmed Fahour forewarns. “So if you think your current modus operandi can survive, you need to think again,” ECOMM2 points out in Amazon Is Coming… Can Wholesale Distributors Respond to The Challenge?“Your preparation now is critical to you maintaining and growing your business.”

The same rules apply closer to home, where some distributors are putting effort, time, and money into their e-commerce sites while others are ignoring the competitive threats or crossing their fingers in hopes that their existing approach continues to work.

Meanwhile, Amazon continues to build its portfolio—having most recently added the prescription drug business to the arenas that it wants to conquer—and reign in the online selling space. eMarketer estimates that U.S. retail ecommerce sales will reach $452.76 billion this year, with Amazon responsible for an “outsized proportion” of total e-commerce sales. The online giant owns about 44 cents out of every e-commerce dollar spent in the U.S., eMarketer reports, up from 38 cents the previous year.

“Buyers want information at their fingertips and a reliable means of delivery,” ECOMM2 reports. “This has been the entree for Amazon to readily meet customer expectations, much like the global fast food chains we all know; nothing really different ingredients wise, but super price-friendly, quick and easy to get your hands on, and everywhere you go the experience is the same high standard.”

Amazon Makes its Mark
So far, Amazon’s impact on electrical distribution has been largely anecdotal—with one or two customers or bids lost to the online giant here and there—but what happens if the current economic cycle takes a dip? If customers become ultra-cost conscious overnight, for example, will more of them start firing up their iPads and mobile phone browsers to find the lowest prices? And more importantly, where does this leave the distributor that didn’t put money and time into its e-commerce approach when business was good?

Justin King, co-founder of the DigitalBranch, and senior partner at B2X Partners, says distributors that either haven’t invested in e-commerce or are unhappy with their current online selling platforms, should realize that digital is simply another channel. Used for both researching and purchasing, it’s a channel that allows electrical distributors to portray large amounts of product knowledge, a wide array of products, and a simple purchasing mechanism. All of this must be supported by great offline service, says King, and value-added offerings that a general-line e-tailer like Amazon can’t match (at least not at the present).

“When you look at challenging Amazon, you have to do it with a ‘digital-plus’ mindset by giving customers the knowledge, expertise, research capabilities, self-service opportunities, and transactional capabilities,” says King, “all complemented by your great offline service.” The latter could focus on installation, customer support, training, or simply answering questions about how a specific product applies to the customer-specific environment.

“Distributors have built their businesses by knowing what products are the right fit for a customer and/or application,” says King, who advises companies to use this as a foundation for a great e-commerce presence, knowing that the initial effort could take up to 12 months to complete, but that it will also be ongoing. “You really want to do this when business and the economy are good, and when you have the resources to do it the right way.”

The Verdict is in: Your Customers are Shopping Online
After interviewing over 1,500 electricians, organizational buyers, and other customers who would typically work with electrical distributors, King found that 68% of them are buying some or all of their electrical equipment and supplies online. Unfortunately, he says most of those buyers aren’t placing those online orders with local distributors. When asked why that was, most complained about their distributors’ websites, how difficult it was to find what they were looking for online, a lack of relevant product information, and the inability to perform self-service tasks (i.e., checking on invoices or ship dates).

“This is just one example of how electrical distributors—especially the independents—are doing e-commerce very poorly,” says King, who adds that even those that are doing it right must carve out a full year (plus the time for ongoing upgrades/maintenance) to get their websites up to speed. “Right now, a lot of these companies are leaking revenues. In fact, there hasn’t been a distributor that we walked into where we haven’t found somewhere between 66 and 72 percent of their customers are buying electrical supplies from someone else.”

In most cases, that “someone else,” is allowing customers to place orders in the middle of the night, keep tabs on their order status, look up product information, and avoid talking directly to sales reps via phone. Pointing to a recent Forrester survey that found that 73 percent of business-to-business (B2B) buyers prefer a website over a salesperson, King says most buyers just want to be able to look up a product and place an order quickly. “We can all relate to this,” says King. “People just want to be able to get in, get out, and do their jobs as efficiently as possible.”

To distributors that haven’t caught onto this reality yet, or that are relying on a non-productive e-commerce platform to do their online work, King says now is the time to put a bigger effort into your “digital plus” strategy. With the understanding that you probably won’t get it right the first time, he says it could even take another year to dial in a successful e-commerce strategy. “Massage it, monitor it, and watch customers as they use your site,” says King. “But most importantly start now because at this point there really is no choice but to do so.”