Distribution Disruptions in 2019

From Insite Software, Karie Daudt discusses the factors impacting most distributors in the coming year and ways to turn potential obstacles into game changers.

Id 36902 Distribution
Karie Daudt, VP of Customer Experience and Marketing for Insite SoftwareKarie Daudt, VP of Customer Experience and Marketing for Insite Software

More than ever, distributors are fighting the battle for relevance in an increasingly changing market. On one side, mega distributors have emerged with massive catalogs and sophisticated digital capabilities. On the other, Amazon continues to gain ground with its state-of-the art logistics power. Distributors lie in the middle of this version of a B2B war, struggling to stay alive, and hoping to thrive.

From the perspective of someone who has worked within the industry for more than 20 years, the competition for distributors has never seemed more intense. At the same time, the opportunities have never been bigger. Here are the primary disruptors for distributors in 2019—and ways to use them to strengthen B2B commerce strategies in the next 12 months.

1. Data Driven Marketing

Many smaller companies can’t compete with large distributors, and certainly not Amazon, when it comes to big data. For that reason, data driven marketing can seem overwhelming. As B2B customer expectations continue to be shaped by B2C experiences, personalization and data science have become a competitive edge for distributors. That competition will intensify in 2019, as mega distributors continue to use AI and other advanced techniques to automate the customer journey.

Most distributors, however, have a massive advantage over the more impersonal interactions of Amazon or a mega distributor. For the most part, small to mid-sized distributors have an in depth understanding of their customers and how they like to buy. That subject matter knowledge can be combined with easier steps to improve digital personalization. Finding opportunities to collect data wherever possible, and analyzing that data at a micro-level can uncover patterns and trends that you can then use to cross-sell, upsell, and increase share of wallet. For example, collecting data on the average purchase by customer, and tying that purchase to relevant items can be a way to improve revenue and efficiency through cross-selling.

The advantage of a mid-size organization is that there isn’t a sea of data. In fact, it’s much easier to gather, analyze, and use smaller data sets to your advantage. Start small, and work from there. The small to mid-sized distributor’s personal knowledge of the customer will make digital tactics based on data much more effective the first time around.

2. B2C Retail

Today we’re seeing more and more B2C companies like Ace Hardware and others going after the B2B space, lured by the trillion-dollar forecasts of analysts. The problem here is brand recognition. These B2C companies have spent millions of dollars over many years building a brand that, in the case of Ace, is well-known and well-liked. The danger of this disruptor is that as customers see these brands they have grown to love in their personal lives, they’ll be tempted to try them out in their professional buying experiences as well. In addition, many of these brands have huge marketing budgets and highly engaged social media channels to distribute the message about their “new” capabilities. We’ve seen this happening in the educational industry, where office supply companies are targeting schools and other academic institutions.

This disruptor can be overcome by identifying on the real competitive factor—the fact that B2C ecommerce is vastly different from B2B commerce. Distributors can retain customers over these flashy brands when it becomes apparent that the B2C brands do not understand the B2B commerce experience. To do so, they must have the appropriate objectives in mind for their commerce systems, focusing on strategies that improve the efficiency of the buyer and the productivity of the buying cycle overall.

3. Technology and Infrastructure

Larger organizations are able to purchase best-in-breed technologies to handle CRM, ERP, PIM, and commerce capabilities, with the budget to create a massive, powerful tech stack to manage every aspect of the enterprise, including B2B commerce. In addition, they can support that infrastructure with a larger staff, which makes managing all these working parts much more doable. Smaller organizations may not have the budget or person power to incorporate something like Oracle or Salesforce into their operation effectively. It may be impossible to compete with the capabilities that a larger distributor (or Amazon) can offer based on an expensive commerce stack.

Instead, small to mid-size distributors need to find the solution that answers most requirements right out of the box, with the ability to extend, customize, and adapt as business grows. There are quite a few good quality, affordable tech stacks that provide most B2B commerce needs. Having said that, it’s important to find a robust commerce solution with native B2B capability that includes the ability to manage customers’ data. It’s easy to fall for the idea of CRM-based commerce, but remember that customer data is often spread across systems, including the ERP. The real way around this disruptor is to ignore the CRM-based solutions and focus on technology that is both built for B2B commerce and can grow with the organization.

4. Manufacturers

More and more, we’re seeing manufacturers demanding digital readiness of their distribution channels as they face their own disruptions from changing customer expectations and greater competition. Manufacturers, for the most part, want to remain loyal to their channel, but if the channel is not modernizing their tools they will look elsewhere. The bottom line is that manufacturers cannot allow the failing of their distribution channel to risk their brand.

Many manufacturers have tried the “carrot” approach to encourage distributors to move toward a digital-ready business model, using friendly encouragement and frequent messaging. As competitive factors intensity, more manufacturers will move to using the proverbial “stick” and mandate digital requirements for their distributors. Although it may cause some sleepless nights, this pressure may be just the impetus needed to move the focus away from traditional processes. In other words, manufacturer pressure could get the C-suite to buy into bigger budgets to build a strong B2B hybrid commerce environment that maximizes the online and offline experiences. Using these new mandates as a way to gain more organizational influence for online commerce could be the political tool distribution commerce managers have been looking for.

As with any industry impact, these four disruptors—data, B2C, technology and manufacturers—all can be transformed into advantages with the right perspective. The answer is to stay ahead of each of these disruptors in 2019. Focus on that, and it’s likely a distributor will stay ahead of the competition—and even beat the big guys.

Karie Daudt is the VP of Customer Experience and Marketing for Insite Software.

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