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As we enter 2018 let’s assess industrial suppliers (manufacturers and distributors) progress with eCommerce. What has really been disrupted and what will be disrupted in 2018? To answer we’ve reviewed the latest excellent eCommerce research. Enjoy!
5 Ways eCommerce Has Already Disrupted Industrial Suppliers
For some leading industrial suppliers, such as Grainger and MSC, more than 50% of 2017 sales is via eCommerce (including industrial vending machines on customer premises). Across the board industrial sales via eCommerce channels continue to increase. History has repeated itself as this Atlantic article details; what Sears did with mail order catalogs in the 19th century then stores in the 20th century, Amazon has done with eCommerce in the 20th and is now doing with stores in the 21st centuries. Looking at Sears today shows what can happen when companies miss big disruptions. If you don’t yet have a significant percentage of your revenue via eCommerce (e.g. >10%) beware becoming the Sears of your market!
Companies that have innovated and invested in eCommerce are growing fast as the Grainger (Q4 and 2017 results) and MSC (Q1 2018 results) examples above show. eCommerce is ‘moving the needle’ – companies once limited by geography aren’t anymore, others have added new sales channels, many have won new customers with better customer experiences or won greater market share (even in mature industrial markets)! A recent CloudCraze study on US and European Manufacturing, Software and CPG businesses found that the Manufacturing businesses are the most likely to attribute future growth to eCommerce programs.
A recent McKinsey report answers when B2B buyers want to use eCommerce and when they don’t. B2B suppliers cannot choose between a great sales force and eCommerce. To drive growth, they need both in a powerful multi-channel sales strategy. Across industry sectors, “what determines the channel of choice is whether or not the buyer is making a first-time purchase.” 85% prefer eCommerce for repeat purchases of exactly the same products, 50% for repeat purchases of products to new or different specifications, 24% when making a first time purchase of a product and the remaining 4% prefer eCommerce in any scenarios.
A recent Forrester Research study shows eCommerce conversion rates and average order values are increasing for manufacturers, distributors and wholesalers. Clearly customers are becoming more comfortable with. and using, eCommerce more!
We’ve blogged about this trend before and it is a continuing one. As the Forrester report says the increasing benefits of B2B eCommerce require companies to work hard to remain competitive, “As B2B companies mature online they must often spend more to continue standing out from competitors“. 48% of Forrester’s survey respondents said their top priority was to develop better and more engaging website content, “compelling content that keeps customers coming back and improving the overall experience of their sites.” Industrial websites that are filled with ample content, especially those augmented by sophisticated tools such as product configurators and viewable/downloadable CAD models and video, are well positioned to sell more than sites that lack content.
5 Ways eCommerce Will Disrupt Industrial Suppliers in 2018
eCommerce is delivering growth but executives are now looking to accelerate it. They expect to achieve this by making 100% of their products available via eCommerce (according to CloudCraze, only 48% currently do this), by offering complex ordering features (such as configurators), by up-selling and cross-selling with recommendation engines, by adding new products that will be sold only via eCommerce (such as subscription based products), by providing more relevant promotions and by using advanced marketing based on IIoT.
Customers are appreciating the value and convenience of eCommerce. According to CloudCraze B2B decision makers ranked this value as shown on the right. In the industrial space tailored product offerings obviously use product customization and configuration tools and downloaded CAD models of components that are included in CAD product design can help with order automation. In addition B2B eCommerce suppliers often customize product catalogs and tailor pricing to individual customers based on contract pricing and negotiated terms. Given the McKinsey finding that B2B customers prefer reordering via eCommerce, these ‘unique to each customer’ setups will increasingly become the primary channel for commerce.
B2B businesses are beginning to understand that the online customer experience is vital to retention as well as revenue. In the CloudCraze study, when asked about the value eCommerce brings to their businesses, manufacturers report that it helps them retain customers (63%), acquire new customers (53%) and drive more sales from existing customers through guided selling, cross-selling and up-selling (46%).
Suppliers are discovering that the digital tools of their eCommerce systems are increasing customer engagement (for example deep technical content, product CAD model viewers and configurators). They are realizing that these tools, as well as facilitating online orders, are also driving customer retention, brand loyalty and even referrals.
Nurturing eCommerce to success has often depended on the active support of the traditional sales team. Some expected the growth of customer self-service would lead to a reduction in the size of sales and service teams. However, CloudCraze’s study reports that most (60%) of sales teams have grown! The transition to more eCommerce requires more sophisticated sales and service roles supporting customers. ‘Order taking’ sales staff are evolving to ‘trusted advisers’ consulting with customers. Product configurator, eCommerce and pricing systems semi-automate order taking. Marketing is no longer just a ‘lead generator’, technology has made marketing, rather than sales, the ‘architect’ of the entire buying process and the customer experience!
We expect accelerating eCommerce growth and more disruption in 2018 – at least in these 10 areas and possibly others too. For example we expect more direct sales by manufacturers reacting to demand from large customers. Manufacturers with sophisticated eCommerce systems (customer specific catalogs, price optimization algorithms and dynamic tools that calculate and deliver product pricing) will enable more direct sales. Distributors will respond with more sophistication in their eCommerce marketplaces to demonstrate their added value and avoid or minimize channel disintermediation! Bottom line: eCommerce is only going to grow in the foreseeable future.
Whether you agree or disagree with us, or a bit of both, please join the discussion and let us know your thoughts as comments below. As always, if you’d like our opinion on your 2018 plans, call us or click either button below: