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Distributors Must Mature Their Digital Branch

A considerable shift is taking place in the B2B market. Propelled by digital technologies, new sales channels, changing buyer expectations, and a global pandemic, distributors are altering their business strategies to include a digital branch. For some companies, this shift is not by intent but, rather, for self-preservation.

As Ian Heller and Jonathan Bein of Distribution Strategy Group stress in their latest research report and webinar, not only must distributors implement an eCommerce channel, they must also enhance and evolve their eCommerce offerings to meet changing industry expectations. In the fifth installment of their NAW-sponsored series, How Technology Will Transform Wholesale Distribution, Bein and Heller present basic eCommerce requirements distributors need to run a successful digital branch, as well as a digital commerce maturity table to identify their current level of offerings.

Click here to watch the webinar recording: New Technology Frontier for Distributors: Sizing Up Marketplaces and Becoming Digital Companies. You can also download their supplementary research report for more information and perspectives.

A compelling case to go digital

“Digital branch” is not in many distributors’ vocabulary. That’s because change can be difficult for those who are content working within their traditional sales model. In fact, Distributor Strategy Group says fewer than half of distributors they researched offer their customers eCommerce, even among companies with $1 billion or more in annual revenue.

Still, distributors are feeling mounting pressure from their customers and manufacturers to go digital. Pre-COVID-19, B2B buyers were accustomed to a convenient online buying experience as a consumer and desired the same features and functionality for their business purchases. Once the virus outbreak hit, their preference to shop online with distributors turned into a necessity. Those with an eCommerce site have been able to maintain and, in some cases, grow their online sales revenue, while offline distributors have struggled. Many experts, including Heller and Bein, agree the world will never go back to how it was before the pandemic. They advise distributors to use this event as a catalyst to make fundamental changes to their business strategies.

As Distribution Strategy Group pointed out in their previous report, Manufacturers’ Perspective on Channel Disruptions, many manufacturers believe the future’s driving force is digital and direct sales. They surveyed nearly 90 manufacturers and found many are growing frustrated with their distributor partners’ lack of digital capabilities and unwillingness to evolve. As a result, some are cutting ties with distributors and selling their products directly to buyers on third-party marketplaces. Their survey respondents predict a 15% drop in the proportion of their revenue coming from traditional distributors over the next five years. Their findings should be a wake-up call to any distributor still contemplating whether to invest in a digital branch.

Fortunately, Bein sees eCommerce adoption on the rise. “Platforms like Unilog’s are enabling midmarket and lower midmarket companies to implement eCommerce without a seven-digit investment, and we’re seeing that in different stages and at different adoption rates across different sectors.”

Develop your digital branch

An eCommerce site adds immense value, even if buyers are not transacting on your site. Bein says distributors often make the mistake of measuring the value of their website’s add by what’s bought through the shopping cart. He maintains that while 80-90% of your customers are looking at your website, only 10% of them are doing business directly through your site. Customers may call their sales rep to place the order, send a purchase order from their ERP, or order through their e-procurement system instead of going through the website’s shopping cart, but know they are almost always starting their buying journey on your website.

The B2B distribution experts admit many distributors don’t have the technology to stay competitive and insist they have to act now if they want to retain and grow their market share. The first step is to build a strong eCommerce architecture with B2B-specific capabilities. Unilog suggests making the following components part of your site’s core architecture:

  • A central PIM to house and manage all your product data
  • A sophisticated onsite search tool to help visitors find your products
  • A comprehensive shopping cart with flexible payment options
  • A robust content management system to easily update and improve your website pages
  • A responsive web design that makes your site mobile-friendly
  • A well-structured taxonomy that categorizes and displays your products in a way that makes sense to buyers
  • An events management tool to offer training classes and other events online along with convenient registration and payment processing capabilities
  • Punchout capabilities that enable online orders to be sent directly from the customer’s procurement system to your website

Once you have your architecture is in place, plan to integrate new features and enhancements. Every website must continue to evolve to meet changing customer needs and enable new technologies. To determine where your current site rests on the maturity curve and understand what actions are needed to move up the curve, Heller and Bein developed a maturity table for distributors. Their three stages of maturity – basic, intermediate, and mature – provide the development of different eCommerce capabilities at each level.

Distribution Strategy Group insists that a mature eCommerce site will soon be table stakes and distributors will find themselves trying to climb the next mountain to advance their eCommerce offerings. “It took 20 years to get to this point on the mountain, but the next big push is here, thanks in part to COVID. This time, however, the climb will happen much more quickly,” adds Bein.

For more of Distribution Strategy Group’s insight, watch the webinar recording: New Technology Frontier for Distributors: Sizing Up Marketplaces and Becoming Digital Companies and download the accompanying research report.

Whether you are just starting your eCommerce journey or are looking to move your current site up the maturity curve, contact Unilog. Our B2B eCommerce experts will show you all the features, functionality, and possibilities our all-in-one solution can provide your business.

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