image Recent Shifts in eCommerce Landscape Distributors View Amazon Business as Biggest Threat: Survey

Annual B2B Digital Commerce Report

Unilog’s 2018 B2B Digital Commerce Survey
SURVEY UNCOVERS STARTLING INSIGHT

EXECUTIVE SUMMARY

The B2B digital commerce landscape continues to evolve into a buyer-centric and omnichannel environment with a much wider and competitive playing field. While some organizations have employed a solid plan to create online channel growth and a better user experience, others are lacking when it comes to any type of eCommerce strategy.

Unilog conducted a survey of more than 250 small to mid-sized distributors/wholesalers and manufacturers to learn about their forays into eCommerce, their current and long-term strategies, and what they feel are the biggest threats to their business. The results proved both enlightening and shocking. In this Annual B2B Digital Commerce Report, we break down their responses and provide insight around our findings to give readers a solid benchmark of the current B2B eCommerce marketplace.

As a digital commerce solutions and service provider for more than 15 years, Unilog has gained great insight into the B2B marketplace as we’ve helped hundreds of distributors and manufacturers make the leap to a digital branch. While some businesses are eager to add an eCommerce site, others are simply trying to keep up with the competition.

Unilog’s 2018 B2B Digital Commerce Survey gave us a chance to see where organizations stand when it comes to eCommerce and understand their path for the future. We received a great response to the survey, which featured questions around four main topics:

  • Implementation and viability of their eCommerce sites
  • Biggest threats to their business
  • Current eCommerce strategies
  • Future focus areas

Read on as we uncover our results, provide insight from Unilog leaders, and reveal a few “aha” moments along the way.

THE HIGHS AND LOWS OF eCOMMERCE IMPLEMENTATION

As to be expected, more distributors (72%) have implemented an eCommerce site than manufacturers (55%). In the B2B marketplace, a buyer can purchase the same product from a number of different distributors. And while price plays a part in the purchasing decision, more buyers want the ease of an online shopping experience. An eCommerce website with robust product content, sophisticated search, and self-service options helps provide that convenience. Today, however, an online storefront is not enough to attract buyers; distributors must provide a personalized and enhanced user experience.

Just as Rome could not be built in a day, neither can a digital commerce site. Website implementation is a large undertaking that can last anywhere from three months to more than a year. Of the survey respondents with an eCommerce site, 31% said it took six months or less to go live, while 51% claimed it took more than 9 months. Though go-live expectations tend to vary across organizations, 46% of those surveyed said their site implementation went slower than anticipated.

“At Unilog, we recommend that launching your new site in a rapid time frame and then evolving the site capabilities and design over the years is a much wiser approach than trying to build the perfect site from day one. You have to take a crawl, walk, run approach. You can’t leapfrog years of eCommerce experience and maturity and become an industry leader after one implementation project. It’s more important to get your new site live as quickly as possible to recognize the business benefits.”

While implementation timelines were a sore subject for almost half of eCommerce site owners, many experienced positive outcomes after go-live. Nearly 80% of distributors told us their eCommerce channel sales have grown over the past 24 months, as opposed to only 20% who have seen stagnant or slowly decreasing sales. Additionally, 44% of respondents claim that 20% or more of their revenue comes from online sales (not including EDI).

“Many in our industry have heard Grainger talk about 60% of their sales coming via eCommerce,” says Suchit Bachalli, CEO of Unilog. “But it’s important to understand that a lot of that includes sales via EDI and their Internet-connected KeepStock vending machines at customer locations. Unilog’s survey shows that nearly half of distributors and wholesalers are doing 20% or more of their revenues via eCommerce – without including EDI. That’s tremendous growth from only a few years ago.”

Perhaps the number-one reason why so many B2B companies are unhappy with the time it takes to launch their eCommerce site is that they’re trying to achieve too much in one big-bang moment.

Brian Lombardo
Vice President of Solution Delivery at Unilog

LOOMING INDUSTRY THREATS

Both distributors and manufacturers voiced concerns over potential threats to their business. The top worry for manufacturers is economic instability, followed by lack of strategic vision, and the inability to attract top talent. However, Amazon Business, the online giant who entered the B2B retail sector in 2015, does not seem to pose a threat to manufacturers. In fact, 43% of manufacturers surveyed said they sell directly on Amazon’s site, often bypassing their distributors.

Distributors generally have the same top concerns as manufacturers, except when it comes to Amazon. One-third claim Amazon Business is a legitimate threat that could affect their company’s sustainability. In addition to manufacturers selling directly through them, Amazon Business offers hundreds of millions of products online, and has the look and feel of their consumer site – complete with B2B functionality and features like multi-user accounts, punchouts, and reports. With a threat this big, one would assume distributors have plans in place to circumvent the Amazon effect. Yet, surprisingly, 52% do not have a long-term strategy in place to compete with the online retailer.

Across both business segments, 34% of respondents said they currently have a strategy in place to deal with the mega-retailer: sell their products on Amazon’s site. Some explained that selling on Amazon improves their visibility, builds their brand, and provides incremental revenue. Others view Amazon as a valuable partner, not a competitor, and consider them just another sales channel. However, a few sell on Amazon for necessity. One manufacturer, for instance, said they participate because they don’t feel the company is going away and their customers are not going to stop looking to Amazon for solutions. A distributor admitted that he was torn because, while his company is making short-term gains selling on Amazon, he can’t help but feel they’re “arming the enemy.”

Then there were respondents with a starkly different approach: beat Amazon, not join them. More than half said they have their own plans to combat Amazon’s move into their territory – from creating high value-add beyond just price and bringing product expertise to the sale, to providing deep integration and an effective, effortless experience for their customers. A few people noted key differentiators like personalized customer service and the ability to out-perform logistically by serving locally, both of which they believe are difficult for Amazon to replicate.

“To fend off Amazon, B2B companies should focus more energy on product content,” says Bachalli. “One of the dirty secrets about Amazon is its product content is good but not great. They rely heavily on their suppliers and marketplace vendors for their content creation, which is at best inconsistent and often mediocre. Better product content drives more eCommerce. That could mean the basics, such as cleaner product descriptions and specs, standardization of naming conventions, and crisp photos taken from various angles. It could also mean diagrams, videos, companion product information, and other useful content to help the buyer make an informed decision. Distributors, in particular, are experts in the products they sell. The most successful distributors find ways to share that expertise online.”

CURRENT eCOMMERCE STRATEGIES

While Amazon remains top of mind for many distributors, the threat of economic instability and lack of strategic vision are their next biggest concerns. Some retailers are currently implementing eCommerce strategies to offset these threats, while others admit they’re not as prepared. When we asked distributors how they would categorize their current eCommerce strategy, 37% are focused on converting traditional buyers to online customers, 31% are concentrating on generating incremental revenue online, and 11% are working on integrating their marketplaces to create an omnichannel business. However, 22% of distributors – 1 in 5 – acknowledge they don’t have a good eCommerce strategy in place.

This lack of strategy can have a huge impact on the viability and sustainability of a digital commerce channel. A solid, measurable strategy keeps an organization aligned with its goals and purpose, and is vital to tracking online success and effectiveness so that a business can build, adjust, and evolve their site as both the marketplace and buyer expectations continue to change.

Evolution is a key success factor of digital commerce, yet for the B2B industry, change can be a difficult concept to embrace. Across both manufacturers and distributors, there is concern about their organizations’ reluctance to “move with the times” and they fear they lack the technological advancement needed to stay competitive – whether it be their legacy systems, non-digital business model, or traditional mindsets holding them back.

1 in 5 distributors acknowledge they don’t have a good eCommerce strategy in place. This lack of strategy can have a huge impact on the viability and sustainability of a digital commerce channel.

LOOKING TO THE FUTURE

New technology, competitive offerings, and customer needs are reshaping the B2B landscape, thanks, in part, to current offerings in the consumer retail market. As a result, 63% of distributors predict that a few years from now personalizing the eCommerce experience will be the most critical offering they will need in order to succeed. Interestingly, while personalization was considered of highest importance in their future digital commerce efforts, nearly 60% of respondents graded their current ability to personalize their customer’s user experience as average or below. It’s feasible that personalization was ranked highest because these businesses with a sub-par experience are feeling its impact and recognize the importance of personalizing customer interactions.

The ability to collect data from the products vendors sell, also known as the Internet of Things (IoT), comes in second with 43% of distributors deeming it a critical technology to have in their digital toolkit. Following closely behind IoT, 40% feel they will need connectivity with online marketplaces to expand their reach and brand awareness. Nearly one-third think big data analytics will be integral in tracking and evaluating their digital commerce channel, as will providing same-day delivery for customers. Selling services as a subscription (13%), chatbots (11%), and voice recognition (5%) ranked lowest in criticality.

How did distributors have the foresight to come to these conclusions? Is it possible they have their ear to the ground and have done their own research, or could it be their predictions are a result of marketing influence?

“Internet of Things – or IoT – has certainly been in the hype-cycle for a while now,” says Scott Frymire, SVP of Marketing at Unilog. “However, I don’t think it’s the marketing hype that influenced our survey results. I think many B2B companies truly understand the potential of IoT in the supply chain. Especially when you couple sensor technology with data analytics and adoption of blockchain technology. IoT will very likely disrupt current business models for many of our customers in the near future.”

FINAL OBSERVATIONS

The B2B digital commerce market continues to grow as expectations for a more flexible and streamlined shopping experience rise among buyers. A robust eCommerce site is a valuable resource for buyers; it gives them an expansive product catalog to shop from, resources to help make informed buys, and a personalized experience so they can find what they want more quickly and easily.

But the buyer isn’t the only one benefiting from eCommerce. Wholesalers and distributors increase brand awareness with a dynamic online storefront and, as a result, can reach more potential buyers. An eCommerce site helps build an omnichannel presence that better serves customers across all their traditional and digital sales channels. It lowers cost per transaction and – when implemented with a proper strategy – increases revenues.

Governments, universities, and large institutions are beginning to mandate that eCommerce be a part of contracts.

Justin King
B2X Partners

Yet, despite the many justifications for eCommerce, nearly 30% of the wholesalers and distributors we surveyed said their company does not currently have a site. These organizations face an uncertain future if they choose not to take notice of marketplace changes and buyer needs. In fact, many distributors today receive bid opportunities where an eCommerce site and/or punchout capability is required.

Whether your business is contemplating building an eCommerce site, or looking to evolve its current online offerings, make sure you have a strong strategy with a clear vision to help guide you through your digital journey.

ABOUT UNILOG

Unilog is a global technology company that delivers powerful, affordable eCommerce solutions for the B2B marketplace. Our cloud-based eCommerce platform and product data enrichment services help distributors, manufacturers, and wholesalers increase online sales, reduce cost to serve, and enhance their digital channel. Unilog is an ISO 9001:2008- and ISO 8000-certified company with North American headquarters outside of Philadelphia, PA and international headquarters in Bangalore, India. For more information, visit www.unilogcorp.com.

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