Why Distributors Don’t Do E-commerce
By Jonathan Bein Ph.D., Managing Partner of Real Results Marketing
Jonathan has worked with many distributors to make their marketing a profit center. He has developed and applied analytic approaches for customer segmentation, customer lifecycle management, positioning and messaging, pricing, and channel strategy for distributors.
As consultants to the wholesale distribution market, we have talked to many distributors who are still determining whether to offer an e-commerce store front or not. We hear common themes in the reasons for not pursuing e-commerce. However, most of the reasons are based on old/faulty assumptions. If you are among those who are undecided or who have decided against doing e-commerce, take a look at the common objections below.
- Our field sales guys won’t like it – A common concern among distributors is that field sales reps don’t want an online store doing their job for them. They think it will cut into their commission and compensation. Any good executive would be wary of a practice that harms such an important facet of their business. They worry that they could even lose those reps. This is very easily solved. Field says reps should be getting compensated when someone buys from one of their accounts. Field sales reps will then see this as a method that increases their own efficiency.
- We can’t get the product data – With the launch of any online store, it’s important to know that you can accurately provide the necessary data for any potential customer. Without it, the customer will either turn away and forego the purchase entirely, or they’ll call up your office, and it will be as if there was no online store to begin with. Many distributors worry that finding the data will be impossible, and if it isn’t, very expensive. Finding photos, attributes, training details, safety data is something that cannot be replaced. The acquisition and management of data has become much easier. There are many third-party companies that can be enlisted to find this data, at $1.50 – $2.50 per SKU, this is in the midrange of expense, but data isn’t required for every product. With a little refining, and a little work, this data can be readily available. The data can be found via another method. An increasing number of buying groups, co-ops, and industry associations aggregating product data for use by their members in e-commerce. If your company is a member, you can likely acquire the data for 15 to 40 cents per SKU.
- Our customers don’t want it – Many businesses feel like this isn’t what they are meant to do. That their customers, don’t want it, wouldn’t use it and that it would be a waste of time for the world they operate in. We think this bears inspection. The first thing to inspect is what generation you’re asking. Our research shows that Boomer age executives could be right in assuming this, as long as their customers fall into the same demographic. For anyone selling to millennials, e-commerce is more than good, it is required. Many millennials say they won’t buy from a business that doesn’t have e-commerce. Any good forward-looking business needs to consider these things.It’s a relationship business – A lot of businesses pride themselves on developing relationships with their customers, being helpful, friendly, and knowledgeable as something that their customers can count on. This is an excellent trait, but the nature of relationships is changing. In the Death of B2B sales person, Andy Hoar from Forrester buyers and sales people along two dimensions: complexity of the product and complexity of the buyer dynamic. When the complexity of both the product and buyer dynamic are low, the sale person is reduced to the role of an order taker. That function is being replaced by buyers using e-commerce to shop and buy. They self-serve via the web. According to the US Bureau of Labor Statistics, in 2012 the US economy employed 4.5 million B2B salespeople. Forrester estimates that 1 million of those sales professionals, mostly what we call “Order Takers”, will lose their jobs to self-service eCommerce by 2020. The only segment of the four that is growing is for reps that provide added consultative value where the complexity of the product and buyer dynamic are both high.
- We already have e-commerce – Maybe you have a website that allows customers to view their accounts, or order a product, or see a (custom) catalog. This is what many distributors define as e-commerce, but when one compares this with Amazon or Grainger, it isn’t even in the same ballpark. You need to be able to not only buy, but shop on a good e-commerce platform.
- It’s too expensive / we can’t afford it – It used to be a million dollars + to get into the e-commerce world, but like most products, e-commerce is becoming commoditized. You can likely find an e-commerce platform for under $20,000 to $150,000. That’s a steal.
- We don’t have the expertise – Many distributors feel that their company lacks the expertise, or IT staff to run and operate an e-commerce platform. In today’s business world, you don’t need it. Just as third-party companies can gather your data, third party companies can largely operate your e-commerce platform and perform many aspects of the marketing.
- We are too busy – Everyone is busy. While your company may have short term goals that it is focusing on accomplishing, Amazon, and other online sales titans don’t care. The market will evolve and pass you by. While you are ignoring these opportunities in hopes of accomplishing other tasks, you are losing immense profit. We’ve done studies that indicate that if you don’t have good e-commerce, you could be losing 2% to 4% of revenue every year. Don’t look at this from a tactical perspective. This is a strategic objective.