Since Amazon entered the distribution space, they’ve changed the way the industry works. Now considered one of the five largest distributors in the world—less than a decade after launching their B2B distribution platform—the ecommerce, media, and cloud computing giant is coming for you. But what does this mean? More competition, more commoditization, and more challenges to the business model.
Whether it’s rapid shipping or unbeatable prices, Amazon’s entrance has made it even harder to stand out in an increasingly competitive market. Following our last blogs on the continued threat of commoditization, tips on how distributors can build resilience and remain competitive even during the pandemic, and the biggest things to know about distribution ERP, we would today like to explore how these trends combine and require a change in tactics.
Does B2B Feel More Like B2C?
Over the past few years, the wholesale distribution space experienced a renaissance. New providers entered the market, new technologies became popular, and things started to move a bit faster. And then a bit faster. Amazon got their foot in the door. Not to be outdone, Walmart jumped into the fray with their Jet.com acquisition.
Seemingly overnight, the two largest retailers in the US had a foothold in an industry. But it’s not just the fact that they are taking on an ever-expanding piece of the pie, it’s that they dragged the industry into a new era. Empowered by easy access and more choice, the average B2B buyer looks more like a consumer, and it’s up to you to cater to them.
A Lot More Options…
In the same way a consumer might ‘showroom’ an electronics retailer to test products and find a better price, abandon an ecommerce cart for faster, cheaper shipping, B2B purchasing departments are gaining choice. Now, they can head to Amazon—who will present them with 20 companies ready to sell the item your customer needs.
In the past, these suppliers were hard to find, making the process of switching between vendors costly, hard to track, and painfully inefficient. This gave you more control over the relationship. But now, the tables have turned, and it’s cheaper than ever to jump from supplier to supplier. Barring an exclusive agreement to provide a specific good, you’re easily replaceable.
A Lot Less Patience
Commoditization means you’re a lot more easily replaced. Consumerization means that you have a lot more replacements. Customers don’t want to call you to discuss quantities, they want to see how much you have and how fast you can have it to them.
As discussed in a recent Acumatica blog on increasing decisiveness in the distribution industry, higher expectations on behalf of the customer are both a threat and an opportunity:
Though mistakes were never tolerated, the rise of B2B eCommerce and a new generation of buyers has resulted in new customer expectations akin to a B2C landscape. Tech-savvy purchasing departments now have the ability to work with a broader base of suppliers. […]
Relationships and customer service still matter to some of your customers, but now more than ever, you’re just considered a way to get products. Hence the term “commoditization.” It’s a sign of disruption for the industry and an unfortunate reality—you’re no different than Walmart or Amazon to the average consumer.
A Lot More Visibility
It’s not just that it’s easy for a customer to switch suppliers—it’s that they are provided information with ease. Ecommerce and distribution are connected in this.
Formerly, the process of finding prices or availability was painfully slow, consisting of email chains, calls, negotiations, contracts, and more. Now, your customer has information at their fingertips and can make an informed decision without ever speaking to a human. Paired with the ease of shopping and the ease of switching, you bear the weight of providing the right information to customers—when and where they need it.
How to Meet New Customer Expectations—Think Like a Customer-Focused Business
As we discussed in a recent blog on the commoditization of distribution, the main strategies exist in either adding value or competing as a cost leader. But you may also need to take a step back and think about how you’re going to communicate this. Understanding what steps go into becoming irreplaceable starts with your ability to think like your customers.
What do they need from you? How are you going to deliver a consistent experience to your customers? How can you set yourself up in an environment where customers expect increasingly digital experiences? How can you provide this before, during, and after the sale?
Understand That It’s Easy to Find Information
Your customers are smart. It’s also not very complicated to find information. Today, anyone can Google a product and see exactly how much it’s going to cost them. They can also see exactly what your competitors are charging and make decisions with this information.
You’re not about to pull the wool over your customer’s eyes—so it’s best to focus on accuracy and reliability.
Know How to Get Online
Distribution has been slow to get online. Yes, most companies have a presence and probably even have a catalog up. But the big players have been doing that for years. Just because you have a website doesn’t mean it’s doing you favors. As discussed in an Industrial Distribution interview, Mike Gartner of Construction Fasteners and Tools notes that being there is only half the battle.
“One element we focused heavily on was creating an online catalogue that allowed for great navigation and exploration of our entire product inventory. […] There has been a huge “gold rush” to not only get online but provide a great experience. Everyone is doing it but it’s pretty new for the industry.”
Providing your customers with accurate, up to date information is pivotal. But delivering on this requires you to understand behavior, design, and flow, working to fit into your customers’ processes, not the other way around.
Focus on Discovery and Education
The Industrial Distributor interview goes on to note that it’s not just about creating an easy flow and delivering for customers, it’s about helping them discover and buy more.
“Overall, our customers have become much more knowledgeable about all the products and services we offer. We’ve noticed about a 20-30 percent increase in the breadth of products that current customers purchase. With online discovery they are finding not only new products, but specials and deals they can take advantage of such as our bulk discount offers. Customers can also go quickly from finding the product to checkout much faster online than via other channels.”
To make this happen, your job is to understand your own products, understand how they link together, and communicate this. Knowing and presenting stock numbers is the first step to providing buyers with information, but being able to go beyond this is the next.
- Do you have a similar item that could replace an out of stock one?
- How are you communicating that there is an alternative?
- Do customers commonly buy two related items?
- How can you recommend this to others?
- Does your current customer base have a purchasing cycle that might apply to a potential customer?
- How would this impact your own purchasing decisions?
The Right Information, the Right Communication, and the Right Mindset: Your Path to Better Distribution
As the process becomes more commoditized, consumerized, and challenging, it pays to work ahead of the path. Moving from old-school distribution to the current landscape requires you to put the right information into the right hands, ensure that it’s accurate and up to date, and know how to use this to your advantage.
From automation to intelligence, the right solution can connect your distribution business, facilitate the move to embrace consumerization in B2B distribution, and put (or keep) you ahead of the competition.
The distribution world will only get more challenging, complex, and competitive in the coming years, and it’s on business leaders to adapt. At Kissinger, we can help you bring your business closer to its goals with the right tools and enhancements you need to thrive. Ready to learn more? Get to know more about Acumatica for Distribution and contact us for a free consultation.