1The Path to the Connected Distributor© 2016 SAP SE or an SAP affiliate company. All rights reserved. The Path to the Connected Distributor A Transformation Imperative Today’s economy is far more sophisticated and agile than in previous decades. In the B2B and B2C worlds, the primary point of focus is the individual customer. The chief catalyst is data, and the medium that brings it all together is the Internet. Wholesale distributors must seriously review and redefine their business models to capitalize on this change. At stake are all current revenue streams, and many new ones, some of which may be entirely novel and external to any existing five-year plan. B2B buyers are more sophisticated than ever and expect the same customer experience in business that they have come to rely on in their personal lives as consumers empowered by digital technologies. The Omni-channel experience includes high-touch and personal experiences across online, telephone, and in-person interactions. Of greatest importance in wholesale B2B selling are the ideas of customer centricity and the use of data and agility throughout the distribution stream. Embracing new best practices here allows for more opportunities in all other areas of business support, including marketing, commerce, sales, and service. In short, the wholesale distributor must transform into a connected distributor. 2The Path to the Connected Distributor© 2016 SAP SE or an SAP affiliate company. All rights reserved. Contents Key Trends Affecting Wholesale Distribution 2 Wholesale Distribution Up Until Now 4 What Customers Are Saying 5 The Connected Distributor 6 Driving Customer Centricity through Contextual Engagement 6 Re-Tooling the Sales Kit 6 Targeting New Revenue Streams 7 Data Is King 7 Proactivity Helps Guide Customer Decisions 8 Digitizing Is Not the Same as Transforming 8 Agility Is the Hallmark of Modern Business 8 Key Business Goals for Wholesale Distribution 9 The Net-Net of Transformation 10 Key Trends Affecting Wholesale Distribution Traditionally, wholesale distributors have worked outside of the spotlight – purchasing, coordinating, and moving products in bulk, allowing the public eye to come to rest exclusively on the retailers who operate at the end of the line. However, disruptive forces are pushing all the way up the channel, and affecting distributors directly. Evidence of this is apparent in the results of a September 2015 study1 conducted by Forrester Consulting, commissioned by SAP Hybris and Accenture. The top three investment drivers for Omni-channel sellers were customer-specific, as shown in the graphic at right. THOSE THREE DRIVERS ARE: > Meeting customer expectations > Providing a consistent experience across channels > Recognizing the lifetime value of the Omni-channel customer This is especially significant since these considerations edged out cost savings, competitiveness, and growth issues as priorities. This accentuates the fact that commerce is changing across the board, and directly affecting distributors. 1 Mastering Omni-Channel B2B Customer Engagement, September 2015, Forrester Consulting, commissioned by SAP Hybris and Accenture. Base: 450 (2015) and 526 (2014) business decision-makers with more than 1,000 employees (500+ in Europe) in North America and Europe Source: A commissioned study conducted by Forrester Consulting on behlaf of SAP Hybris and Accenture Cigital, September 2015 What would you say are the primary drivers behind your organization's investment in omni-channel initiatives? 100% 74% 65% 64% 60% 55% 51% 54% 50% 53% 49% 59% 56% 41% 36% 38%33% 66%70% 40% 90% 60% 30% 80% 50% 20% 10% To meet customer expectations The omni- channel customer has a higher lifetime value To match our competitors' practices To provide a consistent experience across channels To drive additional efficiencies and cost savings To see an uplift in our customer satisfaction metrics To gain a competitive edge over online pure-plays To reduce customer service / call center expenses For inter- national growth / globalization 2015 2014 3The Path to the Connected Distributor© 2016 SAP SE or an SAP affiliate company. All rights reserved. BELOW ARE FIVE SIGNIFICANT WAYS THIS IS HAPPENING: Commerce has become high touch and personal. Consumers are experiencing greater personalization and power while shopping for themselves, online and in-store. They receive instant information on price and availability and enjoy tailored service. They carry this expectation across to their interactions in B2B, and this includes the supply side. Wholesalers are facing pressure to alter their operations rapidly and radically, and provide the same type of end-to-end tailored service that has become routine in retail. Competition is increasingly originating from non-traditional sources, including online giants like Amazon, and manufacturers who sell direct. Disruptors are moving into the markets and channels traditionally served by distributors. Wholesalers are being squeezed, as brands weigh their options of selling direct or choosing other marketplaces, none of which require the services of wholesale distributors. Generational issues are also having an impact. The people who do the purchasing are getting comparatively younger, many being part of Generation Y, and they march to a different beat. Some people in sales and distribution face challenges with understanding and catering to the needs and styles of millennial and Gen-Y buyers. The marketplace is gaining velocity. Viral trends emerge instantly and disappear just as quickly. Retailers constantly reinvent themselves and their offerings for a demanding public. This compels every player in the industry to evolve more swiftly, become more efficient, and provide more memorable customer experiences. Industries are consolidating, reducing the need for wholesale distribution services, and increasing market pressure. Agility and high touch are not terms that the wholesale world has traditionally been familiar with, but the need to transform is pressing and permanent. Each of these trends has a significant impact on a business that has not had to face the minute-by-minute influences that their retail partners have experienced – until now. These trends point to customers, not to pricing or logistics, and this is a whole new ball game for distributors. 4The Path to the Connected Distributor© 2016 SAP SE or an SAP affiliate company. All rights reserved. Wholesale Distribution Up Until Now Three fundamental concepts illustrate the traditional and current status of the wholesale distribution industry. Relationships: Wholesale distribution has, for a long time, relied on relationship selling to capture and secure customer loyalty and ensure repeat business. Nurturing a consistent customer base has remained the primary method for ensuring slow and steady revenue growth over time. Apathy toward online commerce: In past years, online commerce has not played an important role for wholesale distributors, with respondents to an SAP Hybris State of E-Commerce in Distribution2 survey reporting that only 5% to 10% of their total sales are coming from that space. This is significant in light of reports on buyers’ changing habits, which reveal that “70% of B2B buyers are doing research online before purchasing.” Technological inertia: Wholesalers and distributors have been conservative in their adoption of new technology. After making significant investments in ERP and other platforms, a move into new forms of digital commerce is difficult for some. To many, the Omni-channel, mobile world may seem like just another disruptive IT expense. The traditional approach has been one of “slow and steady wins the race,” paired with a belief that industrial enterprises, craftsmen, restaurants, canteens, resellers, and consumers will always need an intermediary to get the goods to where they need to be. But, this no longer applies universally. 2 The 2015 State of E-Commerce in Distribution survey was sponsored by SAP Hybris in partnership with Modern Distribution Management and Real Results Marketing. 5The Path to the Connected Distributor© 2016 SAP SE or an SAP affiliate company. All rights reserved. Most customers are already there. Consider the following statistics: Source: Mastering Omni-Channel B2B Customer Engagement, September 2015, Forrester Consulting, commissioned by SAP Hybris and Accenture. What Customers Are Saying At all levels, including B2B, customers have evolved to a level of sophistication in which the industry term e-commerce is quickly becoming obsolete. To survive and thrive, every business must be digital to a significant degree, and as such, the first “e” in e-commerce need not even exist. Online commerce is not optional. It enhances customer relationships and retention. It opens up new markets and segments. It moves high-cost customers into lower-cost channels. 92% By 2017, 92% of distributors will be selling products online. Source: SAP 38% of customers are using online channels exclusively Another 32% use a combination of online and offline channels B2B buyers are incorporating digital channels more and more into their buyer journey 98% of global business buyers do at least some online research on work-related purchases that they make offline Buyers are increasingly turning to consumer sites to research products While almost all respondents have access to a company-mandated internal portal or a company-dedicated buying Web site, they are using an array of other sources to start researching products and services that they purchase for work 56% By 2017, 96% of B2B buyers will complete at least half of their purchases online. Source: US B2B eCommerce Forrester: 2015 To 2020, April 2015, Forrester Research 6The Path to the Connected Distributor© 2016 SAP SE or an SAP affiliate company. All rights reserved. DRIVING CUSTOMER CENTRICITY THROUGH CONTEXTUAL ENGAGEMENT The supply chain that distributors support is somewhat dated. A singular, linear sequence no longer exists. A more accurate representation is that of an ecosystem – an organic economy where anyone who adds value can participate and engage customers. This gives rise to the need for individualized strategies, agility, and some surprising symbiotic relationships. It is imperative for distribution organizations to embrace these developments and foster a renewed customer-centric mind-set across every line of business, a concept called contextual engagement. Whether a supplier has one hundred, one thousand, or ten million customers, each should be catered to singularly and specifically. The tools exist to help accomplish this, something that would have been unimaginable and logistically impossible just a few years ago. Big data, instantaneous online communication, and mobile technologies make it possible to get personally involved with each customer, delivering relevant content and personalized offers to win and retain business. A number of properties must be developed within an organization to foster a successful culture of contextual engagement. THESE INCLUDE: > Agility, the capacity to pro-act and react in sync with quickly changing customer demands > Reduction of complexity in processes, allowing for seamless, personalized contact > Constant measurement and re-measurement of data and facts about a customer’s needs and history > Unification of processes and resources to facilitate direct, contextual service > Self-service tools that allow the customer to drive the relationship > Development of tools that create a dynamic, content-rich engagement environment These tools help build a closer, more relevant relationship with customers as they approach the company online. This is just as applicable to wholesale distributors’ relationships with manufacturers and their customers as it is to the general public, since they relate to stores. RE-TOOLING THE SALES KIT The role of the sales force is changing, and must be updated in the wholesale environment. Since buyers already have access to the information they need to make purchase decisions, sales reps must adopt a more proactive role as a trusted advisor, equipped with collaborative selling capabilities and real-time customer information, which together enables them to service customers anytime, anywhere. This requires investing in technologies that support the customer journey, along with appropriate interpersonal skills. The Connected Distributor 89% of business leaders believe that customer experience will be their primary basis for competition by 2016. Source: Gartner B2B customers are using their mobile devices to research and buy online. 68% of contractors use smatphones, and 37% of contractors use tablets Source: Gartner B2B buyers prefer 3:1 to self-educate rather than speak to a sales representative. Source: SAP 7The Path to the Connected Distributor© 2016 SAP SE or an SAP affiliate company. All rights reserved. TARGETING NEW REVENUE STREAMS A constantly updating marketplace becomes a prime opportunity for distributors to uncover new revenue streams. They are being discovered or invented everywhere. A water utility is now likely to venture into leak detection services. Sharing economy companies like Uber and AirBnB have changed the transit and hospitality businesses. Established distributors can do the same, venturing into new opportunities for delivery, fulfillment, logistics, channel management, inventory management, and more. The new economy demands far less infrastructure and capital investment than in previous decades, and this enhances the need for agile, creative thinking. The constant search for new revenue streams is critical to the future of successful, profitable wholesale distribution companies. DATA IS KING Public-facing retailers have already learned an essential lesson: a customer’s data is more important than their dollars. Although the sale of an item may yield a profit for a retailer, the information a customer provides – such as interests, browsing history, location, and demographics – becomes the raw material used to generate high-touch, targeted sales opportunities. This is the essence of consistent, Omni-channel commerce – and it is valid for B2B commerce, too. > If a customer’s purchase information has been stored once, it should never have to be re-entered. > When a customer speaks to a service agent or sits down with an account rep to commit to a sale, the relevant information, such as contract, inventory availability, delivery information, and customer profile, should be easily accessible on the nearest computer or smart device without backtracking or delay, even in an area without Internet connection. > When a customer reviews a vendor’s value statement, it should be clear that it includes service and solution models that help drive down and manage total cost of ownership. Innovative wholesale companies must capitalize on data- driven insights and make intelligent business decisions to maximize marketing ROI. This is done by leveraging big data to create a customer “golden record” and analyzing both transactional and behavior data in real time. Innovators seek new ways to leverage the data contained within ERP and CRM systems. They recognize these platforms as the keys to future commerce that will deliver more robust and relevant information to the field more quickly. This information will be packaged in ways that compete not solely on price, but that also provide key account reps with rich, accurate, real-time insights into product capabilities and availability. Agile use of data helps guard against competitors who are already playing a new form of the game, invading traditional markets. While many wholesalers have positioned ERP as the central nervous system of their operations, integrated commerce platforms expose ERP to customers in new and productive ways, acting as a translator between customer expectations and the order fulfillment process. Real-time data benefits the end customer, who can gain real-time insight into inventory, order status, and other valuable information. “Good metrics are incredibly difficult to obtain. You can obtain all sorts of information, but how much of it relates to how much customers stick with you when they have an alternative choice, or come to you in the first place?” Finance director at a global manufacturing firm 8The Path to the Connected Distributor© 2016 SAP SE or an SAP affiliate company. All rights reserved. PROACTIVITY HELPS GUIDE CUSTOMER DECISIONS When data is available, a new opportunity arises in the area of proactivity. Wholesalers can take the lead in assisting their customers to make economic choices, by leveraging the analytics of big data. This may include early alerts to reorder, opportunities for discounts, suggestions or nudges to order other products that are related to current purchases, but not in an obvious way, or simply opportunities to save money, time, and resources. Analytics allows the vendor to take the first step and lead the customer to an even more suitable place. Digitizing Is Not the Same as Transforming Many companies have established mobile-friendly Web sites and a social media presence, but this type of digitization does not equal transformation. It is certainly better than nothing, and it does allow customers to find solutions online, but does not represent maximized transformation. Transformation means the connection between wholesalers and their customers is all-encompassing in its customer-centricity. A customer should control the desired service level, from full service to self-service, and this should be changeable during any interaction. No matter the level a customer chooses, or the channel they select – phone, desktop, smartphone, or tablet – their choices and needs must instantly and seamlessly connect with a supplier’s business process automation. Agility Is the Hallmark of Modern Business An agile mind-set allows for procedures that were unheard of just a few years ago. For example, marketing departments can generate real-time product catalog updates so that physical documents, in either print or PDF format, match their online and mobile counterparts. Marketing content can flow automatically into predefined design templates, reducing labor hours and costs, while increasing accuracy. Accurate and consistent product categorization enables big data analyses of how customers interact with the organization. These types of innovations help distribution management respond faster to changing conditions, better aligning purchasing, sales, and supply chain management, to maximize profitability and minimize expenses. They require less time, staff, and resources to perform data synchronization, which in turn drives consistency across offline, online, and mobile operations – as well as automated customization for localized markets, regions, and business regulations. According to a recent report by Forrester Research3, US B2B ecommerce is on pace to reach $1.13 trillion by the year 2020. Forrester also predicts that4 “combined spend on commerce and order management platform technology in the U.S. will grow at an annual compound growth rate of 10% over the next four years, from $1.4 billion in 2014 to $2.1 billion by 2019. Leading this advance will be manufacturing and wholesale trade firms.” They further estimate that by decade end, “investment in commerce technology by manufacturing and wholesale firms in support of B2B selling channels will exceed that of B2C retailers.” 3 US B2B eCommerce Forecast: 2015 to 2020, Forrester Research, Inc., April 2015. 4 The Forrester Wave™: B2B Commerce Suites Q2 2015, June 2015 9The Path to the Connected Distributor© 2016 SAP SE or an SAP affiliate company. All rights reserved. Key Business Goals for Wholesale Distribution > Know your customers: use data to develop a 360-degree perspective. > Engage through Omni-channel: demonstrate integrity in each relationship with every person across all touch points. > Innovate your business model: commit to reimagine your services and clearly understand their value proposition in today’s digital marketplace. > Consider aftermarket strategies: opportunities have opened up significantly to global competitors and others within the supply chain. > Tap into the Internet of Things: when machinery can be remotely monitored and communicate machine-to-machine, distributor and customer can realize huge benefits. > Rewire the business model for improved billing: provide up-to-date revenue tools for real-time collection. > Focus on predictable recurring revenue to move from a one-time transaction to a recurring approach, building momentum and loyalty along the way. > Leverage B2B opportunities: bundle single product sales with projects, service offerings, subscriptions, and usage-based charging – configure pricing terms and volume discounts, including shared/pooled entitlements across thousands of recipients in real time. > Personalize and automate the buying process through self-service portals. > Collect customer data to provide insights into what was purchased, with customer-specific details about when and how the purchase was made. > Leverage this data as the base for predictive analytics to drive future engagements, meeting needs, and providing solutions – before the customer even becomes aware of them. > Implement customer service convenience by handling queries through any touch point, including email, phone, Web self-service portal, chat, text, branded communities, and social media. > Enable field service experts: give them the tools to perform diagnostics, research inventory information, and order spare parts on the spot. > Ensure routing and escalation rules that are seamless, instant, and complete, eliminating the need for revalidation during all customer service interactions. > Use analytics for continuous improvement. > Update loyalty marketing techniques: ensure that incentives, rewards, and rebates for B2B customers remain relevant. > Control key marketing activities and tracking KPIs from a single dashboard to understand the details behind the numbers. > Identify immediate and long-term opportunities, including target marketing and aftermarket strategies. > Use mobile data to help key account managers access names, customer data, industry news, and customer pain points, even in offline mode, while no Internet connectivity is available. About SAP Hybris SAP Hybris enables businesses to transform how they engage with customers, innovate how they do business, and simplify their technology landscape. With a comprehensive approach to customer engagement and commerce, our solutions unlock opportunities to optimize your customers’ experience and transform your business. We help you drive relevant, contextual experiences across all of your customer touch-points in real-time, so that you can create strong differentiation and build competitive advantage in the Digital Economy. SAP Hybris has helped some of the world’s leading organizations transform themselves in response to changing market conditions and customer expectations – delivering exceptional experiences, adding new channels, evolving their business models, and entering new markets. How can we help you? Explore SAP Hybris solutions today. For more information, visit www.hybris.com. © 2016 SAP SE or an SAP affiliate company. All rights reserved. No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP SE or an SAP affiliate company. The information contained herein may be changed without prior notice. Some software products marketed by SAP SE and its distributors contain proprietary software components of other software vendors. National product specifications may vary. These materials are provided by SAP SE or an SAP affiliate company for informational purposes only, without representation or warranty of any kind, and SAP or its affiliated companies shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP or SAP affiliate company products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty. In particular, SAP SE or its affiliated companies have no obligation to pursue any course of business outlined in this document or any related presentation, or to develop or release any functionality mentioned therein. This document, or any related presentation, and SAP SE’s or its affiliated companies’ strategy and possible future developments, products, and/or platform directions and functionality are all subject to change and may be changed by SAP SE or its affiliated companies at any time for any reason without notice. The information in this document is not a commitment, promise, or legal obligation to deliver any material, code, or functionality. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, and they should not be relied upon in making purchasing decisions. SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. All other product and service names mentioned are the trademarks of their respective companies. See http://global.sap.com/corporate-en/legal/copyright/index.epx for additional trademark information and notices. The Net-Net of Transformation Moving through a complete customer-centric metamorphosis takes planning and should be done in sequential steps, recognizing the distribution company’s level of maturity, and being cautious about the risks and requirements involved in wholesale change. When change is implemented in the right ways, it can significantly increase both the bottom line and the top line. Transformation is about a broad mind-set change and the manner in which customers and the items they purchase are viewed. A strong leader is crucial – a sponsor who can cross boundaries and uses a customer-centric lens to create a harmonized understanding of the entire process to form a shareable, 360-degree vision, and transform a wholesale distributor into a connected distributor. For more information, please reach out to the SAP hybris team at firstname.lastname@example.org
The Path to the Connected Distributor
Today’s economy is far more sophisticated and agile than in previous decades. In the B2B and B2C worlds, the primary point of focus is the individual customer. The chief catalyst is data, and the medium that brings it all together is the Internet.