Distributor E-commerce Lessons: Barriers & Best Practices

Transcription

1 Distributor E-commerce Lessons: Barriers & Best Practices Ben Johnson, Casey s Distributing Ian Heller, Modern Distribution Management Tom Gale, Modern Distribution Management Sponsored by: November 1, 2018

2 Speakers Ben Johnson President, Casey s Distributing Ian Heller COO & President, MDM Tom Gale CEO MDM

3 MDM surveyed distribution executives to understand the state of e-commerce implementation and satisfaction Sectors represented: Industrial/MRO 20% HVACR/Plumbing 17% Electrical 12% Fluid Power 6% Fasteners 5% Ian Heller Safety 5% President & COO Building Materials/Construction 5% Electronics, Welding, Hose, Industrial PVF, Jan-San, Power 158 responses (not compensated) in October, % or less

4 MDM surveyed distribution executives to understand the state of e-commerce implementation and satisfaction 6% 13% Under $2 Million 17% $2 - $10 Million 26% $10 - $50 Million $50-$ 100 Million 13% 25% $100-$500 Million Over $500 Million Respondents Heavily Skewed to Larger Distributors

5 Considering your current progress towards implementing an e-commerce site that allows customers to buy from you, which of these best describes the current status of your website? We have a transaction-enabled website with a broad array of products. However, our results so far (e.g., sales, number of purchases, cost/ease of implementation) has underperformed our expectations. We have a transaction-enabled website and we are happy with the results of our implementation so far. Customers cannot realistically use our website for their regular purchases. We have relatively few or no products available for purchase. 23% 28% 49% 72% of Respondents Do Not Have Transaction-Enabled Websites that Meet Their Expectations

6 Please rate the following factors on a scale of 1 (not a problem) to 5 (major problem) in terms of how significant they have been in preventing you from building a transaction-enabled website. * Resistance from sales force our sales people do not want us to sell around them with a website We tried this before and it didn't work Our customers don t value this we do not have market demand for online selling capability Lack of leadership support our senior leaders to not see the value in spending money on an e-commerce site Lack of technical expertise we do not have the expertise to build / maintain an e-commerce site Cost the technology to build and operate an e-commerce website is too expensive Our current systems architecture makes building an e-commerce site very difficult *Asked of those who responded that their customers cannot use their website for transactions.

7 Verbatim Comments From distributors who responded that customers cannot use their website for transactions Selected/Edited Comments: We only have two customers interested in e-commerce. Lack personnel resources Cost - specifically personnel We recently abandoned a multiyear project to implement an ecommerce site due to lack of 3rd party expertise and integration with ERP

8 Please rate the following factors on a scale of 1 (not a problem) to 5 (major problem) in terms of how significant they have been in preventing you reaching your e-commerce goals. * Resistance from sales force our sales people feel threatened by our website Our customers don t value this we do not have enough market demand to make online selling successful Lack of marketing support our customers don t know enough about our e-commerce capabilities to try them Lack of functionality we do not offer the capabilities we need to be successful (examples: inaccurate or no pricing, lack of product information, lack of availability) Site performance our site does not have the speed or ease of use our customers require *Asked of those with transaction-enabled websites that have underperformed expectations.

9 Verbatim Comments From distributors with transaction-enabled websites that have underperformed expectations. Selected/Edited Comments: We only include in stock items for most common parts but that does not meet the needs of many customers. We have limitations with running specials on our e-commerce site because our contract pricing overwrites everything. So annoying. Clients are still pretty antiquated and adoption has been extremely low. Customers have internal processes in place that don't easily allow them to press the "BUY" button. Old ERP system and lack of modern PIM has made staying up to date almost impossible. We are having great difficulty obtaining good web content. The sales force is a very significant factor, but feeling threatened is not the issue. Positioning nonproduct solutions requires a different competency set than technical knowledge or relationship management, which have been dominant hiring profiles for decades. If your sales personnel are not themselves tech adopters, then the likelihood of success with digital solutions decreases greatly. The number of SKUs we have access to is in the hundreds of thousands. I don't know how to effectively get that many products on a website in an aesthetically pleasing and organized way.

10 Please rate the following factors on a scale of 1 (not a problem) to 5 (major problem) in terms of how significant they have been in helping you reach your e-commerce goals. * We have outstanding technical expertise to ensure we built a highly-capable e-commerce system Our leadership was a major factor in ensuring we succeeded online Our sales force has embraced the website and helped customers learn to buy from it We chose the right system for our requirements Our e-commerce system provides strong functionality that our customers need In our market, customers like to order online *Asked of those who responded they are happy with their ecommerce implementation.

11 Verbatim Comments From distributors who responded they are happy with their ecommerce implementation. Selected/Edited Comments: Our customers receive a discount for ordering online so 95% purchase this way. Many are re-entering the order from their system and entering them into our quick order form. There are a host of features such as faceted search, autocomplete fields and more that we need to add. Our current system works fairly well, and we are doing our best to get the most out of it. I'm guessing that at some point, we will want to move to a more robust shopping cart/product management system to help us increase sales and both company and customer participation. Although our site works well for our customers there is still a lot to build to attract and convert prospects.

12 How successful have your e-commerce initiatives been in driving each of these benefits? 1=Not successful in achieving this benefit; 5=Extremely successful. [All respondents] Reduce outstanding inventory Increase revenue by reaching new markets Increase/accelerate revenue through improved communication of new products, promotions, and offers Working Capital Improvement Sales Growth Win more new customers Improve the productivity of our sales team Reduce customer support by providing information on the website Lower Costs

13 Verbatim Comments How successful have your e-commerce initiatives been in driving each of these benefits? Selected/Edited Comments: Since our site isn't yet integrated with our order system, it isn't a time saver for our team. When we first started it made good productivity improvements by helping customers self-serve and taking pressure off the call center. E-commerce has stayed at about 10% of revenue for years. We're growing our ecommerce biz, but need to leverage the web to serve our existing customers. Our current e-com is driving new customer acquisition, but its smaller customers. We need a solution to serve our larger customers via a B2B portal. We see that as two different functions.

14 Which system do you primarily use to store and organize product data? ERP 59% Other 25% None 9% Edgenet 3% Stibo 2% Riversand 1% Pimcore 1% InRiver 1% Overwhelmingly, distributors use their existing ERP system, or other legacy system, to store product data. This response is consistent among all distributors surveyed, regardless of their success with ecommerce. For the other responses, most appear to be an inhouse solution including Microsoft Excel. Online-Ready Product Data Not a Priority to Most Distributors

15 Which system do you primarily use to store and organize customer data? Salesforce 21% Microsoft Outlook Microsoft Dynamics 35% 9% Epicor CRM Infor CRM Netsuite CRM 3% 4% 4% 5% 6% 9% Hubspot Pipedrive Other Product Data Investment Likely Driven by Sales Dept. Needs

16 Which platform do you use to run your current website? 58% 10% 9% 4% 3% 2% 3% 6% 5% Wordpress Magento Unilog Network Solutions GoDaddy SecondPhase Wix None we do not have a website Other (please specify) Huge Fragmentation, Relatively Low Level of Sophistication

17 Are you considering replacing your current website/e-commerce software in the next 24 months? 46% 54% Yes No Positive Sign: New Websites Likely On the Way

18 As you consider new website software, how do you rank the following factors? Range of functionality for our customers 2.3 Easy for us to administer 2.4 Speed to implementation 2.5 Cost 3.0 Integration into Amazon Business and other marketplaces Average Ranking (1-5 scale) (1 most important and 5 least important) Distributors Have the Right Priorities Here

19 Verbatim Comments Selected/Edited Additional Comments: Mid size distributors have to provide an Amazon ease of experience; it s still too hard to our all the pieces together and ERP vendors could add so much value if they could make it easy. It costs way more and is much more complicated than most industrial distributor CEOs are willing to admit/accept. Most want to "buy their new website" like they open a new retail store, getting it to market ASAP and as cheaply as possible. The CEOs then get disappointed with the results. New models of distribution require new ways of operating. Our industry lags in this area, obviously, but the change is inevitable. The companies that strive will adopt new operating/investment models.

20 Key Takeaways A significant majority of companies (72%) report their ecommerce site either underperforms or does not allow for online ordering. Those who do not offer a transaction-capable website cited technical issues legacy architecture, cost, lack of expertise as the top reasons. Generally, sales reps are a barrier due to their lack of technical sophistication and not due to their lack of support for e-commerce. Since respondents were disproportionately from larger distributors, these results are likely better than market realities The distribution industry is ill-prepared to compete in e-commerce and must accelerate technology adoption as new competitors enter the market.

21 Distribution Reinvented How to do more than just remain relevant.

22 Value Proposition Distributing has changed dramatically over the last 20 years. What made us successful 20 years ago requires different skill sets to remain successful today. Innovative distributors deliver tremendous value today.

23 Case Study Casey s Distributing was founded in 1990 One of the largest distributors of licensed sports related novelties in the country. Over 50,000 licensed NFL, NBA, MLB, NCAA, NHL, NASCAR, MLS and entertainment products from more than 50 manufacturers. Nearly 500 families of products

24 Challenges Good at distributing, bad at technology. Data was inadequate and wasn t flowing properly. Organization lacked accountability. Things are moving too fast for distributors. Our customers are not getting the help they need to solve their challenges. Third party marketplaces are disruptive. Manufacturers are trying to evolve.

25 Technology Technology needs to be at the heart of the culture. Distributors need to be at the cutting edge of innovation. Recognize the opportunities for technology in your channels. Understand the technology available. Become a visionary for what is coming. Constantly align your organization for the future.

26 Data Competency Become a data expert. Harvest the right data. Ensure data integrity. Constantly accurately, effectively and instantly communicate/share the data. Automate. Understand the entire ecommerce data network. Have vision for the future (blockchain, artificial intelligence, etc.).

27 Roadblocks Not everyone in our organization embraced change. Partners talked the talk but didn t walk the walk. Technology was advancing faster than we were implementing.

28 Solutions Invest in technology software and labor. Hire the right skill set. Collaborative teamwork. Partner with Best-In-Class Choose partners that are well integrated into the ecommerce data network (APIs) Build your own software apps if needed to bridge gaps between partners.

29 Conclusion There are many challenges facing distributors and these challenges can become opportunities. Identify opportunities and look to solve them with a sense of urgency. Be a technologist with a thirst for automation. Be a visionary and be proactive. Collaborate. We are better when we work together.

30 Distributors Can Be So Much More Than Relevant

31 Q&A Distributor E-commerce Lessons: Barriers & Best Practices Sponsored by: November 1, 2018