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Market Disruptions Facing Distributors

Darwin’s concept, “Survival of the fittest,” applies to wholesale distributors today more than ever before. New technologies and competition are disrupting the B2B marketplace and forcing businesses to either sink or swim. To help navigate the disruption, the National Association of Wholesale Distributors (NAW) has teamed with Distribution Strategy Group to provide a series of research reports and corresponding webinars for distributors. Sponsored in part by Unilog, these thought leadership pieces feature in-depth research and input from manufacturers, distributors, and buyers.

The first topic in the seven-part series focuses on converging technologies that are on track to transform wholesale distribution. Ian Heller and Jonathan Bein of Distribution Strategy Group explain the new disruptors affecting the industry and provide strategies to solve these challenges. Here’s a summary of their key messages, as well as Unilog’s take on these latest converging technologies.

Want to learn more? Download the full research report and watch the follow-up webinar.

The Artificial Intelligence (AI) revolution is here

With consumer products propelling the popularity of AI, the B2B marketplace is under pressure to integrate the technology to meet customer expectations. In fact, Ian Heller, Chief Strategy Officer at Distribution Strategy Group, predicts AI will be as big of a disruptor to the distribution industry  as the Internet was. Why? Because AI is unique in that it learns and improves on its own without human intervention. The implications of such an intuitive technology are mind-boggling.

Third-party marketplaces like Amazon and Chinese retailer JD.com already utilize AI technology to expand their presence and gain more market share. With their major investments in autonomous delivery technology, JD.com’s distribution center now processes 200,000 products a day with only four employees utilizing drone delivery. Amazon announced it will soon deliver packages to Amazon Prime customers in 30 minutes or less using drones, plus they have other autonomous delivery methods coming down the pipeline such as unmanned vehicles and even blimps.

Voice-enabled buying is another AI technology that is growing popularity in the B2B space. As people grow accustomed to their at-home smart speakers to ask questions, place orders, and perform other basic duties, they want to extend those abilities on the job. Amazon’s smart speaker, Alexa, already offers voice and image recognition to find and order products. The Alexa system is also built into the Amazon mobile app for accessibility anywhere. The retail giant says it plans to extend its smart technology to more “wearable” devices like eyeglasses, ear buds, and a ring you wear on your finger. Amazon is a pioneer when it comes to AI capabilities and, so far, no other retailer holds a candle to them.

AI is fast developing around us, which is why companies must understand how it works and determine where they can incorporate it into their business ecosystem. While drone deliveries and “smart jewelry” may not be in the foreseeable future for many wholesalers, other AI-enabled tools like chatbots are gaining popularity in the B2B marketplace. As these technologies continue to develop, Heller insists they will have a ripple effect on the B2B industry.

Third-party marketplaces are growing rampant

Adding to distribution’s challenges are the ever-growing marketplaces that serve both consumers and B2B buyers. These online retailers have the scale advantage to carry a wider assortment of products, reach more buyers, and offer easier ordering methods. Big fish like Alibaba and Amazon Business have already taken market share from traditional distributors, while others like Google and Walmart are stepping into the B2B arena.

Heller points out that these third-party marketplaces don’t create demand, they serve demand, which is why distributors must find ways to add more value and make themselves essential to customers. This could include offering expanded services, such as rental programs and technical training, or having customer service reps take on more consultative roles to help build deeper customer relationships.

Distribution Strategy Group suggests businesses develop a marketplace strategy that starts with tracking their exposure to marketplaces to determine which, if any, of their products are vulnerable. According to Heller, wholesale distributors should not rule out selling some of their products through third-party marketplaces, which can offer buyers easier access to their products, provide more brand exposure, and create another revenue stream. But with these advantages come risks. Marketplaces like Amazon Business analyze the data they collect from distributors and use it to white-label their own B2B products.

Combat the disruption with better technology

As tech-driven technology and new commerce channels drive disruption within the B2B marketplace, distributors must adapt to survive. This means they must understand the disruptors and develop a strategy that puts state-of-the-art technology at the helm.

At a minimum, Heller says distributors must have the basic tools customers expect from them today – a good eCommerce website and mobile app. But soon these offerings will not be enough as buyer expectations continue to evolve with technology trends. Those who choose to expand their offerings through alternate marketplaces and AI-related technologies, however, must maintain a leading-edge ERP system and technology stack, which includes a product information management (PIM) solution.

A PIM tool provides a tight technology integration between digital and physical sales channels to deliver consistent, quality product experiences. It is the backbone of any eCommerce strategy because it allows you to create multiple catalogs for different sales channels – whether it’s your website or a third-party marketplace – all from one central repository.

There will always be new trends, new technologies, and new threats facing distributors. But those who are forward-thinking and able to adapt will manage the market disruptions and thrive. Are you ready to evolve?

To learn more about the trends and technologies that will transform wholesale distribution, download the full research report and watch the accompanying webinar.

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