How Smaller Wholesalers Can Tip The “Direct-to-Consumer Effect” In Their Favor

Karen Lynch

The wholesale distribution industry is facing unrelenting, competitive pressure from all directions. E-commerce giants are offering Web-friendly convenience, steep membership discounts, and same-day shipping. Retailers that once relied on shipping large volumes of inventory to brick-and-mortar stores are now closing hundreds of stores to focus more on their online sales channels. And even industrial manufacturers are jumping on the bandwagon by selling directly to contractors.

As retailers and manufacturers find ways to cut out the middleman in their supply chains, small and midsize distributors have to work harder than ever before just to stay in business. They need to reinsert themselves into the customer experience by reshaping the value chain; reimagining operational processes; and enabling compelling, value-added business models.

Changing the way an entire industry competes may not be an easy feat, but it’s not impossible. According to the Oxford Economics executive study “The Transformation Imperative for Small and Midsize Wholesale Distribution Firms,” sponsored by SAP, emerging digital tools can empower distributors to increase efficiencies in logistics and operations, offer tailored experiences for customers, and improve supply-chain visibility.

Engaging customers smarter, not harder, builds the foundation for growth

For many years, I have worked with a variety of wholesale distributors – most of which report revenues of US$500 million or less – to tip the direct-to-consumer effect in their favor. In every interaction with our customers, a common goal guides the conversation and technology investment: they hope to differentiate themselves from the competition in new and creative ways that will keep their customers happy.

E-commerce may seem like old news for retailers, but it’s a part of the customer experience that most small and midsize wholesalers are missing. This is a lost opportunity that cannot be regained any other way, considering that most B2B procurement officers and consumers prefer the ease, convenience, and immediacy of an e-commerce site. Very rarely does anyone like to talk to a sales representative on the phone or order an item through email.

However, creating an e-commerce site is not as easy as posting a digital catalog and an order form online. Instead, wholesalers need to think like highly revered digital retailers, such as Amazon and Alibaba, to engineer an online customer experience that optimizes the value of every customer interaction.

For example, a distributor can increase sales orders and improve its inventory hit-rate by making real-time price and stock-level information transparent to all customers online. By analyzing a few years of historical sales transactions with the help of an in-memory computing platform, a wholesale distributor is better equipped to ensure its customers can get the products when and where they need them.

As this scenario proves, the combination of consolidated transactional and inventory information and analytics can help deliver an experience that customers demand and the value wholesalers need to stay competitive. But this is only the beginning – wholesalers can take that customer experience a step further by integrating emerging technology such as:

  • Artificial intelligence: Recommend alternatives or new offerings based on purchase history or items in the shopping cart.
  • Drones or Uber drivers: Compete against the promise of same-day delivery by moving the order from submission to the customer’s job site or warehouse in a matter of hours, not days.
  • In-house 3D printing: Give customers the power of choice. Allow them to purchase products that meet their specific requirements and preferences on demand and without having to be put on a waitlist as a special order or back order.
  • Internet of Things: Work with the manufacturer by tapping into the information generated by sensors embedded in its products to notify customers when a replacement or maintenance may be needed.
  • Process automation: Take every opportunity to collect rebates and charge-backs by automating the complex, high-volume process.
  • Smart vending machines: Install smart vending machines at customer locations or job sites so buyers can access what they need – such as office supplies, safety equipment (including goggles and gloves), and other products – when they need them. By swiping their employee badge, the machine will automatically log the charge in the wholesaler’s invoicing system and can even trigger automatic replenishment.

As you can see, emerging technology brings tremendous value to the wholesale customer’s ordering experience. By realizing the importance of integrating information, workflows, and technology, small and midsize wholesale distributors can address the digital pillars of the buying experience – the customer, supplier, core business processes, and business networks. And for the customer, the level of convenience, ease, and speed that this approach offers will keep them coming back for more.

Get digital transformation right to help your wholesale distribution business leverage its inherent strengths to build a strong and customer-focused future. Read the Oxford Economics executive study “The Transformation Imperative for Small and Midsize Wholesale Distribution Firms,” sponsored by SAP.

Karen Lynch

About Karen Lynch

Karen Lynch is the Vice President, Global Wholesale Distribution Industry Business Unit at SAP. She sets the vision and direction and execute the go to market plan to address the needs of Wholesale Distributors across the globe by using SAP solutions.