How an 'Industrial Distributor' can become a 'Digital Industrial Distributor'?

Till now, there has been little guidance for distributors about where to start and how to strategically use digital tools for e-Commerce, social media, mobility, CRM, advanced analytics, and multichannel solutions. The new NAW publication, "Becoming a Digital Distributor: Strategies and Tools That Create Value" by Mark Dancer is welcome. You can read the guide intro here.

Some distributors have already seen the opportunity and strategically adapted to the customer need - for example HUB Industrial, is a $25 million distributor, saw e-commerce revenue grow from 5% of revenue to 15% during 2014. But, as the guide says, for many distributors, "it’s been more by happenstance than design".

At CDS we think digitalization is a crisis of change for Distribution. As you may know the Chinese character for 'crisis' consists of twoChinese Character for Crisis is Characters for Danger and Opportunity characters, one means 'opportunity', the other 'danger'. So a crisis is both. Distributors need to pursue the opportunity and avoid the danger/threat. We think the current situation can be summarized in these 3 points:

  • We agree with the guide that "digitalization of the distribution channel is inevitable" and "if your business is not leading, then at the very least, you must keep up."
  • Manufacturers are strengthening their brands, educating customers, expanding their reach, improving sales and marketing productivity. Distributors should strengthen digital collaboration with their manufacturer partners.
  • New disruptive channels have emerged (for example Amazon Supply) bringing a B2C online shopping experience and sophisticated analytics to the B2B world. Distributors must compete with these new channels.

The guide offers "7 strategic findings" as recommendations. We've followed their notation for the first 5 below, and added a few specific thoughts for industrial distributors. Please use the guide and our industrial sector specific suggestions to:

  • Take advantage of digital tools to better serve your customers
  • Work more collaboratively with your suppliers
  • To compete effectively in your market to grow your sales and profits!

1. Digital tools hold promise and peril for distributors. As the guide points out distributors are intermediaries, that have supplied the knowledge, information, and data that drove the value chain. To maintain that role industrial distributors must now fulfill it digitally or be replaced by others. In CDS's view these 4 capabilities are now 'table stakes' for most industrial distributors:

  • A digitally searchable online catalog
  • Product detail pages, each with SEO and including downloadable 3D CAD models of applicable products
  • Configurators (for configurable products) and also including downloadable 3D CAD models
  • Syndication of your product CAD models across the internet.

If industrial distributors fail to deliver these, new online disruptors will provide them to B2B customers.

2. Distributors are refreshing and refining the core value offered to customers. Distributors are used to revisiting their business models as technology drives change. In CDS's view, industrial distributors should re-examine how they deliver their core value and use digitalization to drive new competitive advantage. For example:

  • Present the taxonomy of the product set with visual navigation and faceted search on your website to provide simplicity and clarity
  • Product detail pages are where product selection happens - pictures and images need to be high quality. For most industrial products 3D CAD models of products need to be available to ensure you are helping users download and 'design in' your products. CAD viewers need to allow zoom, pan, rotate and measure. Product descriptions need to be thorough and include downloadable 2D spec sheets and drawings for inclusion in design calculations, references and specifications. When a CAD model is downloaded, how often is the physical part purchased?

3. Digital tools are not a one-size-fits-all solution for distributors. Your digital tools should present the core value you want to deliver. Different industrial distributors may choose to use the tools differently. For example CDS recommends that 3D CAD Model downloads (but not views) be used to generate sales leads by requiring registration before download and that those leads be automatically transferred to an industrial distributor's CRM and from there distributed to sales people. Distributors need to keep their business model goals in mind and work with experienced suppliers to create the solution they want. As one distributor explained in the guide, “It’s easy to get lost. Our people don’t really understand digital tools, and vendors are promising the moon. We got started by focusing on the value we want to provide to our most important customers, the ones where we will make our stand.

4. Value strategies, not value propositions, are an essential ingredient for success. By nature, distributors add value, to customers and suppliers, through a range of inventory, logistics, technical and financial services. In the B2B industrial sector, distributors have a new opportunity to exploit because the person selecting (usually the Designer) and the person buying (usually the Buyer) are often different people.The selection and purchase are often two separate processes executed at different times. With digitalization the two processes, and the two people, can be bridged in a unique industrial way:

  • Designers select the right product, download your 3D CAD model and include it (along with your part number) in their design.
  • When the design is approved, the Buyer references it and orders your part.
  • Online registration by the Designer, prior to 3D CAD download, provides a sales lead. It also alerts you to creation of new designs that include your products. Inclusion of these leads in your CRM and distribution to your sales team and partners can expand sales opportunities.
  • For Buyers, alternative payment methods, current pricing (personalized to particular customers by login), current product availability and order tracking can ensure their confidence in your e-Commerce.

5. Change will accelerate, but don’t drink the Kool-Aid. In CDS's view industrial distributors should focus their digitalization use on:

  • Improving the customer experience
  • Reducing costs
  • Increasing revenue growth.

To do that work choose suppliers with proven ROI for other industrial distributors/suppliers. For example, these case studies may give you some ideas:

  • J W Winco: "The ROI has been tremendous, saving us literally thousands of dollars when calculating the time and effort we save! Just think, no contact is ever made with our inside sales or customer service people, they design, they buy, and it’s all done online!"
  • Global Tooling: “The site ...paid for itself in new business within 3 months. This has yielded the fastest and best ROI of any marketing investment I have ever made!"
  • RTS: "In just the first 4 months we’ve received enough online orders to pay for the cost of the site. The assistance of the site has also helped our salespeople close other offline orders so we are on track to achieve the ROI we hoped for.”

That's our take, please let us know what you think below. As always, if you'd like our opinion on your situation or want see an online demo, call or click either button below:

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