Manufacturers and distributors are, naturally, well-aware of the successes that strong e-commerce platforms bring to business-to-consumer (B2C) enterprises. Think Amazon, primarily, or any other big-box stores that offer their whole catalog online, in addition to in-store pickups or other convenient perks. But for these manufacturers and distributors, their business-to-business (B2B) dealings have most often taken on different forms for years, if not decades: contracts on paper, or over the telephone, via dedicated salespeople. Things are a bit slower than they are in Amazon’s world, but at least a buyer knows they can pick up the phone and talk to a familiar person who had their best interests in mind.
Even in the B2B world, that landscape is changing. Because more procurement people — and industrial professionals on the whole — are increasingly familiar with simple and elegant B2C e-commerce online, they’re starting to bring some of those demands into their acquisition process. Linda Taddonio, Insite’s Chief eCommerce Strategist, has seen these changes occur on over the last decade, and argues that it’s time for manufacturers and distributors to implement a true B2B e-commerce system.
These days, she says, “Customers are now in charge, and they’re going to dictate who thrives. I think most organizations — especially manufacturers — are kind of unwilling to believe that. They want to believe their traditional business model is still in control, that their sales rep relationship, which builds those contracts, is still holding up their business model. What I think they don’t realize is that it’s being nipped away at in ways they might not have the analytics to support.”
Some scoff at the idea that a procurement person might abandon manufacturer A in favor of B simply because A doesn’t have an e-commerce presence, but Taddonio says she’s seen it happen. Oftentimes, people prefer the simplicity of searching through a catalog online and making the purchase necessary rather than listen to a sales pitch or deal with an extensive manual process, particularly if they’re also strapped for time.
Taddonio says the path for most manufacturers and distributors will be to “weave” e-commerce into a greater business strategy that includes personnel shifts and major enterprise-level goals. She’s seen major distributors, who have faced this transition earlier than manufacturers, make massive moves to become more e-commerce enabled. Grainger, for example, added 300 people to their staff to handle e-commerce alone.
She says, “Manufacturers are going to follow in this path. They’re going to start to wake up and realize it’s a part of their overall business strategy, not a separate part of their business strategy.” And in her experience, there is interest in B2B e-commerce from all levels of manufacturing organizations — it’s not just the IT department wanting to upgrade from their old system.
According to Taddonio, there are other, and perhaps better, reasons for implementing an e-commerce solution than simply going after the few customers who demand tech-savviness. The move to an e-commerce system requires that salespeople get on the phone with existing customers and help move them to the new system. And while this might seem like a chore, Taddonio says this is an excellent opportunity to get information from these clients as to what they want, and what they’re seeing competitors do.
She says, “Most manufacturers have very poor, if any, analytics, when it comes to looking at their customers and what they’re buying.” If you’re in a competitive environment, why not use that necessary phone call to make your offering better?
For many, then the problem is not whether to implement a B2C-esque e-commerce system, but how. Taddonio says, “Today, the [important] people are in the room. Their eyes are wide open. They know these things are important know, but they haven’t been paying attention to it, so they don’t know how to craft these strategies for their business.”
Fortunately, she has a few tips for manufacturers or distributors who are confused about how to approach this dilemma.
The first, and perhaps most important, is to get everyone onboard — this isn’t just a mission for the IT department. It is a “technology-oriented” project, as Taddonio says, but one that impacts the entire organization. If the C-level people aren’t engaged, and aren’t willing to push their employees in the implementation, it won’t succeed. And if the salespeople aren’t aware of what’s happening, and aren’t actively bringing on clients old and new, they’re going to cause a lot of confusion and frustration.
Once everyone is onboard, the next question is strategizing the implementation, and determining how strongly the company will push for it. Taddonio says many people see an e-commerce system as a “mountain to climb,” being so large it would take years to roll out. Instead, it’s best to adopt an approach that can get an offering out in six to nine months, which is what Insite does for their own clients. And the truth is that in Taddonio’s experience, once the site is implemented, the “lightbulbs” start going off, and the company can start to craft even better improvements down the road. The key, however, is getting an offering up in the first place.
Finally, as with most investments, there is the calculating an ROI or a percentage of clients on-boarded to the new system. Taddonio says in her experience, even the C-level people — those who should be pushing hardest for a high adoption rate — are timid, at best, about what kind of success they might achieve. She says, “Most of the time, I have the leaders of an organization when we get into this conversation, and they look at me and they are honestly stumped. They ask, ‘What’s reasonable? What should we expect?’”
She says to forget about single-digit adoption rates — “Why would you set that so low?” — and set a serious goal of 20 to 30 percent of orders coming in online over a 12-18 month period. Plus, she says, “A high percentage of the time, when clients onboard one of their customers, and they listen to a buyer, they find out something competitively that they didn’t know. An incredible value.”
This leads in directly to the ROI picture. By crafting a company-wide initiative to move to e-commerce, companies could save far more than they might expect. Taddonio recommends a rough-but-revealing calculation, by taking the costs of the number of people in customer service or sales — essentially, all the money spent to get an order — and divide that by the number of orders the company takes in. That’s a rough estimate of the cost-per-order. And then she asks: “What if you displace 20 percent of that?”
Clearly, the ROI picture is there. Really, the whole business case is there. In many situations, it’s just a matter of getting into the right mindset, and then creating ambitious-but-realistic goals for the roll-out. And, as Taddonio says, make it into a company-wide initiative which involves IT, marketing, sales and leadership. That shouldn’t be an intimidating prospect — it should be seen as an opportunity for the company to tackle the Internet-hungry business world while preparing itself for the road ahead, all while achieving a return.