E-Commerce has helped many retailers open up new markets, expand offerings and increase revenue. Most notably, the estimated sales volume from Black Friday through Cyber Monday increased by double digits while in-store purchases decreased by almost $1 Billion. The majority of Black Friday purchases are B2C (Business to Consumer) and is obviously very different than a B2B (Business to Business) relationship.
B2B commerce is largely built on long term relationships and customer service. I had a recent conversation with the CFO of a B2B distribution company and he stated that the company could not survive any disruption in its ability to take orders and service customers. His comments highlight some of the crucial tenets for a B2B distributor. While B2C is largely transactional in nature, B2B is largely based on long-term relationships and customer service.
E-Commerce can be a costly investment for small to mid-size B2B distributors but the results can be significant. With the implementation of an e-commerce system at a distributor, business customers can serve themselves and validate pertinent information about their buying interests. While not all customers will want to purchase online, many will appreciate the service if it is easy to use, transparent, and gives them control over the buying process. I know many people who prefer to order things online instead of talking on the phone. Because of the pervasive and expanding online shopping world, more and more corporate buyers are moving to online purchases.
Additionally, visibility into a customer’s buying patterns opens up the opportunity for upsell and cross sell of complimentary products. Consider the buying experience on Amazon’s web store. When a customer is shopping for items on Amazon, there is always a section stating “Frequently Bought Together” or “Customer who bought this Item Also Bought” which is based on the item currently displayed on the page by the customer. Each of these marketing sections represent additional revenue opportunities for Amazon. These tools can also increase customer satisfaction by making sure customers order all of the necessary parts when placing an order.
So, how can B2B distribution companies be as successful as B2C retailers with e-Commerce initiatives?
First, know the margins on each item and understand the additional costs associated with picking, packing and shipping an item. For instance, if an item that costs $1 to distribute and has a margin after shipping and handling of 15%, that equates to .15 per item sold. Unless you are in a very high volume environment it will take tremendous volume to make any real profit from selling an item that has lower gross margins. Determine minimum order amounts to make sure there is real profit attributed to items being sold online. Minimum order quantities, an understanding of margins on items, and customer profitability will help create a lucrative web store. Additionally, it is important to streamline warehouse activities to ensure that operations are performed efficiently. For example, picking each order as they come in may seem like a good idea, but it is not necessarily an effective use of warehouse labor. By optimizing the warehouse and deploying wave picking, organizations can reduce the cost of delivering goods to customers.
Second, work with customers and user experience software designers to create a user friendly and intuitive site. Customers must find it easy to place, track and modify their orders. Many B2B distributors sites are bare bones and intended to be very basic in nature. That ensures that simplicity for a customer to see things such as a product listing, but many times placing the actual order can be problematic. Making it simple for customers to view past orders, create copies of orders and search for new items can create a great experience that will keep customers coming back and doing the work of order entry for your organization.
Lastly, whatever your message for customers, work to build that into the e-commerce experience. Make sure that customers know you want them to be satisfied at the end of the ordering process and, if they are not, give them an option to help the business improve. Good customers love to give feedback and help improve their satisfaction. By offering customers the opportunity to create the process and build features into the e-Commerce site, it will help to guarantee customer satisfaction and further adoption.
B2B e-Commerce is gaining steam in many non-traditional sectors. By improving margins and allowing for self-service, distribution companies can improve margins and improve customer satisfaction. Our team at Kraft can help create compelling websites, integrated with best in class inventory management capabilities and customer relationship management, including marketing automation.