Marketing is essential to wholesaler e-commerce
Some two-thirds of digital washouts are management’s failure to change the culture of the firm or acquire the skills to make e-commerce work.
The growth of e-commerce as a competitive advantage in B2B distribution is becoming well known. Almost weekly, we get calls from wholesalers who have challenges on getting their money’s worth from their tech investment. We are sympathetic to their questions; e-commerce is expensive with a full software bundle of transaction platform, PIM, faceted search and punch-out running well into seven figures.
More than we would like, however, the questions on e-commerce have little to do with making the software work or integrating to the ERP system. Most software issues are solvable as ERP vendors and integrators have a growing body of experience and solutions to get e-commerce software to work.
More often, the problems are under the umbrella label of “digital transformation” of getting the staid, old distribution culture to support, use, and recommend e-commerce to customers. In fact, the problems with digital transformation are becoming common enough to warrant their own jargon including the term “digital washout,” which refers to an investment in state-of-the-art e-commerce software, but which fails to transact much, if any, incremental sales online.
Some two-thirds of digital washouts are management’s failure to change the culture of the firm or acquire the skills to make e-commerce work. Plus, the sparse nature of marketing in wholesaler-distributor firms is a significant contributing factor.
Practical distributor marketing and e-commerce
Defining the marketing discipline, especially in digital commerce, is a moving target. We are constantly bombarded by newish terms including automated marketing, account based marketing management, etc. A definition we’ve used for the function is that marketing is all the stuff you do to solicit the customer and drive business before sellers hit the street.
This typically means customers are segmented, prices are analyzed and pricing policy is structured, product usage and needs are determined, vendor’s MDF (market development funds) are planned, and the service platform meets quality standards. These events, planned well and well-developed, make the personal sales interaction much more successful. And sales support and the personal seller are, still today, one of the most expensive categories in distributor operations.
For e-commerce, not having a well-defined or poorly funded marketing discipline often means mediocre or less online success. There are several parts of the marketing discipline, used by successful wholesalers across the spectrum of approximately four dozen vertical markets in the North American wholesale sector. We list them and why/how they are indispensable to successful online commerce.
Segments are groups of customers with common product, service and associated needs. In B2B markets, segments are often based on NAICS, revenue size, service need or other meaningful grouping.
Common segments in PHCP wholesalers might be residential plumbing, repair and remodeling plumbing, commercial contractor, municipal water contractor, etc. Segmentation allows the firm to develop different segment based sites. This allows users to quickly access product groupings, services and self-help information as the segmented site has information that is prioritized for the customer.
A good example of a segmented site is webstarauntstore.com. The food service distributor, on the far right banner of the homepage, has markets segmented by usage including bakery supplies, concession supplies, and grocery-deli supplies. In essence, bakeries, concessionaires and delicatessens have different product and service needs and the segmented sites are easy to research for different business types.
Product managers are responsible for product decisions including application-based technology, vetting new products, revamping product lines, planning marketing events with vendors, etc. Many wholesalers don’t have formal product managers, but the work of product management can often be found in several functions including sales, operations, and purchasing.
For e-commerce, product managers are responsible for the product taxonomy or the structure of common products within a search group. For instance, commercial faucet taxonomy may be done by institution type including hospitals/health care, schools, offices, etc. Taxonomy is common to an industry and helps the customer refine their search for a product. Hence product managers need significant experience in a product category and with the customer’s ordering habits.
A reasonable example of taxonomy in play can be seen at HVACPartsOutlet.com. In the homepage banner, the shop-by-product-type tab lists common product groupings for the HVAC contractor. For instance, under the label condenser motors, the page opens up to motors by voltage and manufacturer, which are common breakdowns in the industry.
Online customers will also self-educate or seek online answers to application questions. Product managers along with resident SME’s (subject matter experts) and vendors are instrumental in setting up educational videos, selecting relevant FAQ pages, and setting up online chats to answer application questions. Product breakdowns and parts lists are also a part of application support. A growing practice is to use MDF (marketing development funds) from vendors to offset application information efforts.
Marketing’s role in application information, outside the production of materials, is to research, manage, and change online materials as product and service technology changes. A library of application supports should be done that is similar to the product taxonomy. Customers often search for the information in the same way they search for products to purchase.
Managing the customer account online includes the ability to research financials, order history, and warranty information. Typically, the development and maintenance of this system includes accounting, operations, marketing and sales personnel. Marketing, however, is tasked with monitoring the usage of the system and customer satisfaction with it. Changes to the system should be supported by marketing or the customer may not support the change and online sales can fall .
E-commerce strategy is the positioning of technology to support online efforts. In recent times, pundits have coined the term “digital strategy” to refer to the software platform that supports online commerce. The term, however, has fallen into disfavor as the purchase of software is, in and of itself, not strategic as it must contain a customer interface component. We define the e-commerce strategy as the ability to develop an online presence that reflects the unique value-added components of the firm.
Far too many wholesale firms are convinced they need to copy the leaders in wholesaler e-commerce including Grainger, MSC Industrial, etc. Typically, this is a big mistake. These firms have spent tens of millions of dollars on e-commerce, have multiple platform brands, and over a million SKUs. (MSC’s latest count is 1.5 million online SKUs).
Our work with mid-market wholesalers and their e-commerce strategy works to uncover the unique value of the firm prior to revamping the digital platform. This can be more difficult than it first seems as many firms are not, prima facie, wholly sure of their unique value.
In our current research, we are finding that services by mid-market wholesalers are a differentiating factor in the competition against e-commerce giants such as Grainger and MSC Industrial. These companies will need to learn how to translate their service value to an online platform. The mastery of this is imperative as more and more customers move online to contrast and compare their wholesale supplier base.
A qualified and sufficiently empowered marketing discipline is a significant factor in e-commerce success. Firms with long-standing and comprehensive marketing management show a significantly better performance online than firms with weak marketing or sales-driven marketing.