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Distributors Weigh in on Technology Disruptions

Several emerging technologies have the potential to upset the B2B industry. Ian Heller and Jonathan Bein of Distribution Strategy Group outlined these disruptors in their initial research report last month. They contend these new technologies may have a minor effect on the distribution marketplace or they could revolutionize it. In either case, they say distributors must understand and prepare for their potential impact.

In the second installment of their multi-report series, Heller and Bein surveyed distribution executives about these potential disruptors and what plans they have to respond. They revealed the results in their latest research report and accompanying webinar. Overall, survey respondents shared two basic sentiments: that many of the emerging technologies are not a threat to their business or they are unsure of their threat level because they do not know enough about them. The experts at Distribution Strategy Group worry that distributors’ lack of understanding and inaction could give industry disruptors an advantage.

As a sponsor of this technology disruption series, Unilog is sharing a few highlights from the survey, including candid feedback provided by distributors.

To review the entire survey results, download the research report and watch the webinar.

Some artificial intelligence makes sense to distributors

Distribution executives see the value of artificial intelligence (AI) in inventory management and sales and marketing applications. As AI gathers data, it provides more recommendations and efficiencies for businesses. But when it comes to specific AI like voice ordering and warehouse robots, few say they plan to use either technology in the foreseeable future.

Some respondents expressed interest in voice ordering, saying it benefits the customer and limits their data entry time. Others don’t see huge advantages. One executive explained they don’t have much need for voice ordering since their customers have too many line items in a typical order to make it efficient and effective.

More than three-quarters of those surveyed have no plans to install warehouse robots, despite their efficiencies. Amazon uses over 300,000 robots in their warehouse while most distributors don’t have the resources to invest in even a fraction of that number. Heller concedes that a handful of warehouse robots will not make much difference to a distributor’s bottom line. To maximize the full benefits of robot technology, he says companies would have to redesign their warehouses and distribution centers and then add large numbers of robots.

When asked about drone and autonomous vehicle deliveries, many executives say they are not sure if they are a threat or an opportunity for their business. Despite the uncertainty and lack of enthusiasm for the delivery methods, Heller predicts this AI will be a differentiator for those who use it. But, he adds, these technologies may be available to wholesale distributors via third parties so that they won’t have to invest in proprietary capabilities.

“It’s (drone and autonomous vehicle delivery) an opportunity if you use it well and stay on top of it, and it’s a threat if you let somebody else outflank you in terms of customer satisfaction with your delivery capabilities,” Heller explains.

Distribution executives, however, see item recognition offering many more advantages for their customers. Using their smartphone’s camera, buyers can take a picture of a product and the distributor’s mobile app will search for the item in their online catalog. The majority of respondents, 57%, feel the technology will be essential to their business within the next two to four years while 14% claim they need it now to stay competitive. One executive noted they want to offer item and voice recognition as a shopping option for their customers, but their eCommerce vendor does not yet provide the technology. For Unilog eCommerce solution subscribers, they don’t have to wait. Our mobile app provides advanced features out of the box, including image recognition, voice search, and an offline shopping cart. New customers can take advantage of our hybrid mobile app option that deploys the same day their website launches.

3D printing, cryptocurrency, and blockchain…oh my!

Distribution Strategy Group’s survey results reveal a few emerging technologies are not in even in scope for distributors. When asked if 3D printing, cryptocurrency, and blockchain technology pose threats or opportunities, the overwhelming response is “we don’t know.”

Also known as additive manufacturing, 3D printing is not seen as a primary threat to any of the distributors surveyed. But 52% also have no idea if it is a threat or an opportunity to their business, which implies a lack of understanding. Nearly 34% are unaware if their customers use 3D printing, while almost 60% say none or less than 5% of their customers use it. Despite the unfamiliarity, Heller and Bein believe distributors should follow 3D printing’s development to determine its future role in the supply chain.

Distributors also deem cryptocurrency and blockchain technology unfamiliar or unnecessary. Almost 74% say they will never accept cryptocurrency (e.g., Bitcoin) or are unsure. Experts tout the alternative currency as an anonymous and more secure method of transaction. But cryptocurrency is also unregulated, which is why it is banned in 23 countries.

Feelings about blockchain are evenly split. Half of respondents think blockchain can improve their operations and the other half either disagree or don’t know. This sophisticated technology uses a decentralized database housed in the cloud to distribute data across a peer-to-peer network. Technology Futurist Jack Shaw explains that it allows all of the players in a particular ecosystem – suppliers, manufacturers, distributors, carriers, and retailers – to see all the relevant information they are authorized to see as it is updated by any of the other players in real time. “By sharing, in effect, a single common pool of information across an ecosystem, we dramatically increase transparency of the supply chain and the ability to see and manage that information much more effectively,” says Shaw.

Despite the clear applications blockchain offers in the B2B marketplace, the concept is still ambiguous to many distributors.

One executive in the survey remarked, “Blockchain will become an inherent part of transaction technology, but I don’t believe it will change the nature of competition or provide a competitive advantage.” Another said, “Blockchain and cryptocurrency have a long way to go. Outside of an economic meltdown, they will not be widely accepted in the next decade.”

Distribution Strategy Group is concerned this relative complacency about blockchain could pose a problem for distributors down the road. Heller suggests companies bring in a consultant to help them understand blockchain and its transformative effects on their industry.

Third-party marketplaces are the biggest hot button

Third-party marketplaces appear to be the most relevant and pressing disruptor for distributors. Online retailers like Amazon Business, Google Shopping, and eBay Business and Industrial are chewing up market share with competitive pricing and a wider assortment of product offerings. But in the same breath, these marketplaces provide an additional sales channel for distributors looking to expand their exposure and add another revenue stream. Distributors struggle with marketplaces as 43% of respondents view them as both an opportunity and a threat.

Almost three-quarters of the distributors surveyed do not sell through any marketplace except for their own eCommerce site. Both Bein and Heller agree this lack of involvement is a positive move right now. Selling through these third-parties brings potential risks, including the recent claim that Amazon is stealing distributor information and using it to white label products.

Heller asserts industry marketplaces will be the future for distributors, where buying groups will compile their data to build their own industry-specific marketplaces. Survey feedback shows executives are already studying marketplace strategies and industry-supported opportunities.

“This (insight) is a shout-out to NAW and its members because it shows they are on the slightly more sophisticated end of distribution. They have experience in terms of technology, adoption, and management approaches,” says Bein.

Analyze the results

Disruption technologies are making their way to the B2B marketplace. The question is will they help or hinder your business? To find out more about these disruptors and gain a benchmark of others in your industry, download the research report and watch the Distribution Strategy Group’s follow-up webinar. Then stay tuned for the next report and webinar in the NAW/DSG series that explore how wholesale distribution customers will use disruptive technologies from their suppliers.

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