The Future Of Wholesale Distribution: Using Data To Drive Action

Werner Baumbach

Recently I was asked if I thought that wholesale distribution would be any different 30 years from now. To me, the answer is so obvious that I took me a few seconds to respond.

Instead of polishing the crystal ball, let’s look back 30 years and think about how much our world has changed since 1986.

Back in the second half of the 1980’s, most of my music collection was still on tape, and the Internet was still not available to most of us. When I had to write a paper (yes, I was still in high school back then), I would go to the library and hope to find a book or two on my subject.

My PC had a hard drive that most modern cameras would fill with fewer than 5 shots. Drones were science fiction, globalization was not part of my vocabulary, and shopping internationally meant bringing something home from vacation.

I think we will all agree that the world has changed dramatically since then, and so has the way we do business. Technology has gone through through revolutionary cycles, and most of it is now based on vast amounts of data.

A 2015 study revealed that 90% of all data created has been released in the last two years. With the emergence of all kinds of intelligent tools and gadgets, it is not surprising that the same study predicts continuous data volume growth rates north of 40%.

Looking at some social media posts, I will admit that much of that data has limited value. But on a less judgmental level, for the first time in history, the problem is not that we have too little data. The challenge now is to comprehend the vast amount of information available, create insight, and act based on that knowledge.

The wholesale industry has traditionally had a very detailed picture of its customers, especially on the sales side. Our industry benefits from maintaining close relationships with customers. In our new global and virtual world, these relationships are becoming more complex – a risk for future success, but more importantly, a vast opportunity.

Customers do have a simple choice: to take their business elsewhere. But we need to understand how to best meet our customers’ needs, and to be truly successful, we must find the best approach for individuals or for groups of customers with similar interests.

Already we are seeing wholesale companies use sentiment analysis to optimize their assortments. Items that receive bad feedback can be eliminated to avoid unhappy customers. In the next step, predictive modelling can be used to increase efficiency for new product introductions and monitor success. Customer segmentation will need to significantly evolve to factor in additional aspects and insight and deliver personalized offers and value. And we will need to find ways to stay consistently engaged with our customers across all channels.

The key to success is being able to compile all information across different sources—both virtual and direct—and create an instant picture that can be used to best service the customer in the moment. Just because a customer was looking for a printer a week ago, for example, doesn’t necessarily mean they are still interested in that purchase today.

Going back to the initial question: I am convinced that in 2046, the world—and the wholesale distribution industry—will look significantly different than it does today. And while my crystal ball is a bit murky on how much automation, robotics, drones, and virtual reality the future will include, it is fairly clear on one point: Everything will be based on data and the ability to use it to drive informed action and activities.

For more insight on digital transformation in wholesale, see Winning The Gold Medal In Wholesale Distribution.

About Werner Baumbach

Werner Baumbach is a solution manager for the SAP Global Wholesale Distribution Industry Business Unit at SAP. Werner has over 20 years of experience in different roles in software and consumer industries. He has a passion for innovative and future technologies and solutions in Wholesale and Retail.