Manufacturers and Distributors: How to Do Ecommerce Right

Posted by Ranga Bodla, Sr. Director of Industry Marketing, Manufacturing & Wholesale Distribution

Ecommerce has been a boon to retailers, enabling them to enter new geographical markets, attract customers who prefer to buy online or at off hours, and compete successfully with much larger retail chains. Now manufacturers are finding they can reap the same benefits by selling online, not only to their distributors and business partners, but even directly to consumers. In fact, 70 percent of distributor respondents in the fourth-quarter 2013 MDM-Baird Distribution Survey said they plan to invest in ecommerce in 2014, highlighting that more distributors are recognizing the importance of the Web to the future of the channel. Manufacturers aren’t very far behind. Among manufacturers, 18 percent said they would spend more with traditional distributors this year based on the rise of ecommerce in the channel and 17 percent said online-only players would get greater share. One reason manufacturers are interested in ecommerce is cost reduction. Online ordering requires fewer employees and can reduce inventory costs for both B2B and B2C commerce. It’s also an attractive option both for consumers and B2B partners, many of whom prefer to place orders online.

But selling online requires planning. Manufacturers and wholesalers must consider how ecommerce will affect their retail partners, most of whom probably also sell online, and create a cooperative strategy that benefits both the manufacturer and retail partners. In the Enabled Commerce: Dealing with manufacturing ecommerce from business to business webinar, Raj Kumar, partner of consumer retail practices, AT Kearney, offers these guidelines for manufacturers and distributors moving or engaging in B2B ecommerce:

  1. Create an omnichannel customer experience. Both B2C and B2B shoppers want to access the same products and features, payment options, and customer services regardless of the channel they are using. Manufacturers and distributors need to make it as easy to research, purchase or return products online as it is through the traditional retail and distribution channels.
  2. Integrate systems. For ecommerce to work, data must be able to flow between the ecommerce, CRM, inventory, shipping and financial systems. Customers need accurate, real-time information on things like product availability, sales prices, and shipping status. Manufacturers need integrated data in order to forecast inventory needs, predict and control costs, and analyze customer purchasing data to identify trends.
  3. Prevent potential channel conflict. Manufacturers often fear they’ll alienate their channel partners by undertaking B2C ecommerce. However, there are ways to prevent that. Creating joint marketing and sales promotions, tying partner trade funds to the manufacturer’s or wholesaler’s overall sales, and not selling under retail prices will help to avoid channel conflict as well as boost overall sales. For instance, one possible strategy is to divide the manufacturer’s products into different categories--such as low turnover vs. high turnover, or commodity products vs. customized products--and allocate some to channel partners, others to the manufacturers.
  4. Leverage sales data. Analysis of sales data can not only give the manufacturer or distributor better understanding of sales trends and buyer preferences, but can also be helpful in showing channel partners how your ecommerce effort is affecting them. In many cases, the data will show improved sales for everyone.
  5. Map out a multi-year plan. Research your sales and support channels and develop a three- to five-year roadmap for incorporating ecommerce into your other channels. Identify potential pilot programs to roll out to test the ecommerce waters.

Ecommerce can benefit all of the partners in the value chain. The key is to take time to understand your customer and partner needs and how they make use of existing channels. Done correctly, ecommerce can be an opportunity for growth. A recent survey by NetSuite found that two of the top growth initiatives of manufacturers and distributors are to identify new markets and expand their product lines; ecommerce is an obvious strategy for accomplishing both.

Whether you are looking at B2C ecommerce for direct sales to consumers, or B2B ecommerce for partners to more easily order inventory, online sales offers real benefits to manufacturers and distributors.

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