The challenge for Wholesale & Distribution
Working in and around the Wholesale & Distribution (W&D) sector, it's clear to see that these organisations are operating in an extremely delicate 'squeezed middle' - under such pressure at both ends of the supply chain that achieving target margins is a constant battle.
Even before the currency fluctuations brought about by Brexit, the entire market was expecting more for less. B2B audiences are becoming used to the great experiences being delivered by B2C leaders, including personalised offerings and self-service capabilities, while digital has been recognised as a key means of increasing reach, engagement and conversions, all while driving down cost. However, the often onerous tenders that are seen as a necessary obstacle in the industry have made it increasingly challenging to demonstrate the value that can be delivered in these areas, instead typically placing the focus on price alone.
Equally, faced with the growing threat of manufacturers taking their offerings direct to market there’s an imperative for W&D organisations to innovate, and do more than act as a showroom, in addition to maintaining and enhancing their business-as-usual activities. Even then, though, the commoditised nature of the industry means it’s very easy to shop around; making it even harder to build a loyal and engaged customer base.
So if you too find yourself in this middle as a W&D organisation, how can you keep both sides happy? Or, even more pertinently, how do you demonstrate the value needed to secure both customer and supplier loyalty - especially if you’re a challenger in your particular space?
Delivering value for suppliers...
Firstly, suppliers. To encourage this group to work with you rather than take a direct route to market, you need to highlight the unique advantages your organisation can deliver. For example:
- Reach: Do you have data that shows the reach and customer engagement you can offer supplier organisations? Can you demonstrate to them how your management of the customer journey delivers value, and how you're able to track and manage interactions on this journey to deliver uplift in sales? Of course not all interactions are equal signifiers of intent (for example, downloading a product sheet versus downloading marketing material, or signing up to a newsletter compared to multiple site visits), but demonstrating how these actions are differently weighted will provide additional confidence in your ability to deliver optimum results.
- Advertising: It’s important to understand your advertising’s effectiveness, so that you can show suppliers how it’s reaching and converting as many customers as possible. The ability to trace the customer journey from the initial click right through to interactions with specific products and services (or the achievement of any other key goals you may have set up) is key to facilitating this, and of course your dedicated campaign landing pages will help you dig into the value being delivered through different channels such as PPC or email.
- Conversions: Are both your website and your sales team converting at a high enough rate? Here, tracking drop-off rates and levels of abandonment will reveal specific bottlenecks or problematic areas along the customer journey, and provide greater insight into the types of customer you should be targeting. Additionally, any customer data you capture can be used to follow up on abandoned orders or carts and raise your conversion rate still further.
- Repeat orders: You need to show suppliers that you can provide a loyal customer base, and that the reasons for this loyalty go beyond simply offering the lowest price. Repeat orders and average customer lifetime value are great indicators of this loyalty.
- Innovation: Are you reaching new markets that may not otherwise be accessible to suppliers, or serving existing ones more effectively than they can? Digital channels play a key role in efficiently tapping into new regions, audiences and revenue streams, for example, as well as supporting innovative self-service capabilities and the ability to recommend products on the basis of previous customer transactions - so consider how well you’re leveraging these capabilities to offer a more compelling value proposition for suppliers.
...and value for customers.
Where W&D customers are concerned, delivering value is all about ensuring they're given the best possible experience in buying from you - after all, using a middleman has to be made more attractive than going direct to the manufacturer. And no longer is the status quo legacy system acceptable. As mentioned in the introduction, B2B audiences these days expect exactly the same levels of user and customer experience that are being delivered elsewhere in their daily lives. Compare your own buying experience to that of leaders in the B2C space and beyond - such as Amazon or GOV.UK - and make sure you're applying the latest trends and techniques to your own services.
Ultimately it has to be easy for customers to buy from middlemen W&D suppliers. All aspects of your site, including product listings, filtering and search tools need be simple, compelling and intuitive. Your most valuable customer journeys - such as the order process and form completions - should be optimised to be as frictionless as possible, and as you likely offer a much wider range of products than any single supplier, it must be easy for customers to compare different options efficiently and effectively. Additionally, you should be providing as relevant a service as possible - targeting your recommendations on the basis of previous interactions or purchases, for example.
Once a prospect does buy from you, you also need to make it easy for them to buy again, through personalised communications, content and offers that integrate the explicit and implicit customer data you capture. Not only will this help increase the speed and ease with which they can order relevant products, it will also make them feel more valued as a customer.
Of course, achieving all this requires a detailed understanding of exactly who your customers are - their personas, habits, buying patterns, etc. User research activities are crucial to providing you with this insight, while usability testing will help validate new and existing concepts, designs and other key aspects of your offering.
Not forgetting yourself…
While it’s crucially important to deliver value to both your suppliers and customers, that doesn’t mean you should ignore opportunities to make improvements that benefit your organisation directly - as this will likely have a knock-on positive impact on those key groups too. For example, there are many ways you can increase your ability to reach more people, with less effort, by understanding your most effective channels and directing additional investment towards these. Knowing the potential size of your market/audience too, and breaking this down into the different types of people you should be engaging with, supports even more targeted efforts, and greater return on investment as a result.
Optimising your use of technology can also deliver significant process efficiencies, whether this is through providing customers with self-service options (or even a tiered approach featuring both self-serve and account-managed options), or by automating key processes and improving your ability to scale quickly and easily, to cater to growing demand. It can even support a more flexible business model that allows you deal with orders both large and small, simple and complex - increasing your pool of potential customers (and suppliers too).
Finally, don’t forget the disruptive forces that digital advances have unleashed. While it can be difficult for W&D organisations to effect change, due to their size and desire to protect established revenue streams, there are a number of models that are being employed to support innovation projects and maintain business as usual too (for more information on these kinds of approaches, take a look at our white paper on “Turning the Oil Tanker”). Your team will likely have a wealth of ideas worth exploring, and digital leaders in your industry and beyond can offer further examples of valuable innovation initiatives.
W&D organisations may be facing challenges from all sides - but as this article has shown, there are a number of ways some of the pressure can be taken off this squeezed middle by demonstrating value at every turn. When you achieve this, you’ll likely find that supplier relationships become stronger, customer loyalty increases, and margins grow even greater - helping safeguard your position and offering even as market conditions and business models continue to shift and evolve.
For first-hand insight into how a global W&D organisation defined and implemented an effective solution to safeguard on-going growth and efficiencies without jeopardising existing success, be sure to check out our webinar "Keeping the lights on: how RS Components tackled the challenge of legacy code".