E-COMMERCE is the biggest challenge in the coming years

According to PwC*, as many as 80% of global manufacturers in the industrial sector consider digital marketing and digital sales to be the most important business challenges of the next 2 years. In both the B2B and B2C segments, the pandemic has become a catalyst for change and greater openness to online sales and marketing platforms. The share of "contactless" sales will also grow due to increasingly widespread remote work, among both buyers and sellers.

Changing strategy and shifting more toward online sales remains the focus of most industrial manufacturers. E-commerce channels open up a range of opportunities, including maintaining sales liquidity in the event of another crisis similar to the pandemic, expanding reach into new customer segments (along with data on their habits and needs), and increasing revenue and reducing service costs by cutting spending on marketing and direct sales. Selling more products and services online also allows for applying a higher margin.

- Achieving e-commerce ambitions and goals requires fundamental changes in the operating and business models of both manufacturers and their distributors. This process is already underway. Industrial companies are investing in effective e-commerce platforms and are also changing their approach to product assortment and packaging, digital marketing, merchandising and customer service. Going through the entire transformation process brings tangible benefits, but first you need to prepare for such a change. Successful e-commerce transformation programs are implemented gradually, increasing the capabilities of multichannel B2B and B2C commerce with each successive step – says Zsolt Balogh, General Manager for Central and Eastern Europe (CEE)

What to sell online and what offline

What to sell online and what offline

Unlike traditional retailers, most manufacturers will likely use sales models such as direct online sales (research and purchase online) and Ro/Po (research online, purchase offline). Both models require manufacturers, distributors and sales channels to create an online platform rich in product information, easy purchasing functions and customer support (call center, bots) – modeled on what operates in the consumer products or financial services market.

Sales model depending on product complexity

Model dependent on product complexity

One challenge is deciding which simple products, such as spare parts, will be candidates for e-commerce, and which complex components will require personal selling and after-sales service.

For many industrial companies this will be new territory and may prove to be a very complex undertaking. After analyzing their product portfolio, companies will most likely need to segment SKU (Stock Keeping Unit) items depending on whether they are to be low-touch or high-touch. In other words, which products and services, such as order replenishment or MRO (Maintenance Repair Operations), can reasonably and easily be sold online with little human contact, and which of them require more involved consultation between buyer and seller. Part of this inventory will depend on the complexity of a given product.

Digital experiences customers expect

Expected digital experiences

Increasingly, B2B customers expect fast, personalized 24/7 service similar to what they have become accustomed to when buying consumer products. This is something more than just product catalogs and prices. A modern digital CX (Customer Experience) includes, among other things: product visualizations, availability information, targeted promotions and marketing, access to order history, product tracking, product and after-sales support.

Beyond sales itself, the added value of such a customer relationship model lies primarily in the information that can be obtained to increase the effectiveness of targeted marketing, such as data on customers' purchasing preferences and needs.

E-commerce changes channel dynamics in distribution and supply chains

Impact on distribution chains

Why is e-commerce the most important challenge for manufacturers?

One of the most significant consequences of the development of e-commerce platforms in B2B and B2C trade is its impact on existing distribution channels and networks, which will need to be reconfigured. This may mean conflicts with distributors who are unable to adapt to the new hybrid of online and offline commerce. Some distributors, wanting to stay in the game, have increased spending on digital technologies in a way that is consistent with the expectations of both manufacturers and end users. Such conflicts require management.

Enter the world of e-commerce, but slowly

Companies should be aware that they are on the threshold of an unprecedented transformation in which much is at stake. Good planning of the initial stage of building a new strategy will help prevent potentially costly shortcomings and disappointments in the future.

Short-term challenges are worth long-term benefits

Despite the challenges involved, pursuing the development of digital sales and marketing is inevitable. If done properly, building digital B2B and B2C channels will open up new opportunities, including: reducing service costs while raising service levels, gaining a competitive advantage, increasing loyalty among current customers and expanding the base of new ones.

Taking the above steps will help determine how traditional marketing and sales can change for the better and how large a role a new online marketing, sales and distribution channel will play in the organization. Finally, the question remains whether a company, depending on the nature of its business, should create its own e-commerce platform or cooperate with an external company.

*PwC: Chief Operating Officer (COO) Manufacturing Survey 2021

Summary

According to PwC research, 80% of industrial manufacturers consider digital marketing and sales to be key challenges of the next two years, and the pandemic has accelerated the development of e-commerce channels in the B2B and B2C segment. Companies must decide which products to sell online and which require contact, and invest in digital customer experiences. These changes will affect distribution networks, potentially causing conflicts with distributors that have not modernized.

Interestingly, the transformation should be gradual, and its goal is not only revenue growth, but also reducing service costs and increasing margins. The final question concerns the choice between an in-house platform and cooperation with an external partner.