B2B E-commerce is over $1 Trillion in sales and represents 12-15 percent of all North American B2B sales. Online sector sales grow at an 8 percent CAGR and a quarter of all B2B sales will be online by 2025. Today, 60 percent of distributors have an online effort, as do 40 percent of manufacturers. As traditional sales-assisted orders grow at the GDP rate of 2.5 percent, if a B2B firm does not have an online effort or, is not successful online, they are more than likely losing repeat sales. Research finds that 70 percent of distributors and half of manufacturers term their online efforts as unsuccessful. This substandard performance comes after significant sums are spent on software and online specialists.
The upshot is that mature firms, coming from the sales-assisted way of doing things, are having a tough time making online happen. This would explain why, in a recent MIT-Sloan review of global e-commerce sales, made for e-commerce firms, representing only 17 percent of online businesses, transacted 47 percent of online sales. Our work in helping mature firms adapt to a digital world finds that the majority of firms have one or more common failure modes that mitigates their online growth. We list them, starting with the most common, in the remainder of this blog post.
1. Failure to Establish an Online Culture
Most mature firms consider that online B2B sales are an extension of the existing sales and marketing effort but nothing could be further from the truth. Online customers want the convenience, flexibility, and speed of a quality online effort. They don’t want to be sold, have a customer service rep call them back or trade emails about price and availability; they want to self-serve. Our observation is that some of the most successful sales cultures make the worst online candidates.
Creating an online culture takes significant planning and support from C-Level Executives; the firm just can’t morph into online success. Online forecasts need to be made, sellers need to support online migrations of selected customers, sales territories often need restructuring, and roles for online specialists have to be created and supported. Common failure symptoms of online efforts include pricing overrides of online prices by sellers, failure to move accounts online, lack of an online plan, and high turnover of digital specialists. These events are symptomatic of an inability to establish an online culture and, without this, succeeding online becomes increasingly difficult.
The sales-assisted culture is often opposed to online efforts and threatened by pending obsolescence of some or all of their work. If the sales driven organization is successful in halting initial online plans, they become emboldened and will thwart repeated efforts. Existing sales cultures need communication on what the online plans are and the changes that will be made. If existing positions are threatened, employees must feel they are being treated fairly or they will find any number of ways to slow online progress. Digital Washouts, where the firm sells less than 5 percent of total volume online, are common in firms where there is no evidence that executives sought to anticipate and tackle cultural problems in the digital transformation.
Establishing an online culture ideally starts before the first dime is spent on software; most firms wait until they’ve endured a relaunch or two of online efforts and usually after they’ve misidentified the problem. An online culture simply doesn’t morph from a sales-assisted culture and cultural barriers are real and have to be overcome for online efforts to succeed.
2. Lack of User Experience (UX) Research for Online Success
We find where less than 5 percent of existing firms conduct valid User Experience (UX) research before their online efforts begin. User experience research is, as it sounds, the development of both qualitative and quantitative research instruments to find out what customers prefer in their online experience. Qualitative efforts include personal surveys regarding online preferences. The data from qualitative efforts is used to design the quantitative online survey. We’ve found where the vast majority of customers will readily talk about their online preferences, including favorite online suppliers. Everything from content, search, online chat, and order maintenance can be quantified as to the best in class. User experience research can also find information on site design, layout, buying history, and a host of other features and benefits of leading online competitors.
Too often, we find where firms believe they know the online preferences of their customers, but, akin to the problems in establishing an online culture, this is mostly an assumption error. The online customer doesn’t want the sales-assisted experience, if they did, they wouldn’t purchase online. The upshot is, even if sales-assisted cultures conduct UX research, they often design biases into the research instrument that compromise the research results. We strongly suggest getting outside help in UX research from researchers who have B2B experience and familiarity with both online and traditional efforts. UX research designed by B2C firms often misses subtle detail needed in B2B markets, hence the need for experienced firms to help with research efforts. We lobby hard for UX research before the e-commerce software platform is built-out and insist if the online efforts stall. Nothing beats good research on best-in-class online competitors and customer preferences; the information saves significant time and rework costs.
3. Incomplete E-Commerce Suite
The e-commerce transaction platform that allows the customer to order online, maintenance, and research price and availability is key to online success. Currently, the online experience takes a quality transaction platform, PIM (product information management), faceted search, punch-out suite, and quotation (specialized pricing and service) software. Without these specialized bolt-ons, the e-commerce experience is not competitive and a chore to the online buyer. Our research on firms that invest in a full e-commerce software suite is that they sell 2.5x to 3x more online than their competitors.
Currently, end customer research finds only 30 percent of distributors and 40 percent of manufacturers show online growth and most of these firms have at least three of the five parts of a full e-commerce software suite. The upshot is that it is difficult to secure online growth if the customer cannot adequately place, maintenance, search, and transact the order. Firms that try to circumvent purchasing a full e-commerce suite, normally don’t grow their online efforts consistently and often have an online Stall-Out; defined as initial online growth to industry averages and then a stall-out and eventual decline. The reason for this is that management gets tired of the significant funding that it takes to succeed online and they curtail investment. As their competitors continue in software investment, they lose online customers, stall and then recede in online performance.
4. Inadequate Content and Limited Search Capabilities
B2B E-Commerce has long recognized the need for accurate, detailed and timely content. The number one reason online buyers leave a site is distrust of content. The average B2B product has 45 to 55 variables which means that it is all but impossible to keystroke content using html text and keep it current. For each 1,000 products, there are 45,000 to 55,000 variables. The upshot is that competitive e-commerce needs a PIM (Product Information Management) platform; something that we almost never compromise on. In fact, we suggest firms invest in a PIM before they invest in a transaction platform as they develop their digital capabilities.
Limited search capabilities are also an issue with online success. B2B products can be complex, last decades, have significant downtime risk and are difficult to identify. Hence a strong faceted search is essential as well as product nomenclature changes and cross-reference lists. Like a PIM Platform, we rarely compromise on vetted faceted search software when it comes to B2B e-commerce excellence. Finally, a full-search capability often includes a configurator and cross-reference software(s) to help with common applications where one or several products are chosen. Hence, configurators are much more common in B2B sites than B2C sites.
5. Digital Obstinance and B2C Transformation Specialists
Many existing firms, who washout or stall-out with their online efforts, believe they can simply “try it again,” and “again” until they succeed. Usually, this is not a great idea as repeated failures leave online specialists dis-spirited and they leave. This also makes the sales-assisted culture emboldened and obstinate in their belief that online commerce can’t replace their efforts. When faced with digital failure, we encourage executives to seek help with experienced professionals with B2B experience. Too often, Digital Transformation is bandied about by B2C consultants who want in on the digital B2B marketplace as it is 2.5x to 3x larger than B2C. The problem is that success in B2C is often very different than B2B. The differences lie not so much in software as in the need for in-depth understanding of what B2B customers need, the application risk of their purchases, the need for reliable and trustworthy channel partners and to have this translated into their online offering including the need for enhanced product content and comprehensive product search. Too, it helps if the B2B advisors have some experience in your industry from a business model and product vertical standpoint.
Qualified B2B Transformation firms are hard to find; today they are overshadowed by B2C firms entering into the B2B space. Our advice is to vet the experience of your B2B transformation consultants. If they don’t have lengthy site experience with B2B firms, before starting their careers as transformation specialists, they likely won’t make good advisors for your ongoing digital plans.
B2B Commerce as a Necessity
B2B E-Commerce grows at an 8 percent CAGR and will be 25 percent of all sales by 2025. Today, 47 percent of online sales are transacted by made for e-commerce firms which represent only 17 percent of B2B businesses. The upshot is that made for e-commerce firms have a much easier time succeeding online than existing “sales-assisted” firms. Executives from mature firms have a daunting task in making their firms succeed in a digital world. Believing that the firm can simply “morph” into an e-commerce powerhouse is a grossly misplaced belief. Crossing the divide from a “sales-assisted” to “self-serve” firm takes the best of user-experience research, planning and executing for a significant culture change, spending significant funds on a comprehensive e-commerce suite, and collaborating with experience B2B professionals who can help.
Scott Benfield is a consultant for B2B firms in digital and traditional sales, marketing, and general management. He has been quoted in Forbes and The Financial Times and is a member of Digital Channel Advisors, a firm dedicated to helping B2B firms succeed online. Scott can be reached atScott@BenfieldConsulting.com or (630) 428-9311.