In 20 years, how will people look back on today’s wholesale industry? Will they view it as a boomer business model? Absolutely not.
Instead, what they will see is the precise moment when the wholesale industry set a bold new course for the future. Our current era will be remembered as a time of change and upheaval, driven by the wider digitalization of society. A period with fundamental implications for our personal lives, for how we collaborate at work, and for the way companies interact with each other.
What is digitalization in the wholesale sector?
5 challenges for wholesalers undergoing digitalization
6 digitalization benefits for wholesalers
Step by step to digital excellence in wholesale
4 proven digitalization strategies for wholesalers
What is digitalization in the wholesale sector?
Wholesalers today face major challenges due to new digital competitors, changing customer expectations, increasing product and pricing transparency, and growing pressure for efficiency. At the same time, however, digitalization also offers valuable opportunities. Equipped with the right strategy, wholesalers can use their core competencies to not only address these developments but also profit from them.
Digital sales and after-sales channels, self-service options and
a personalized B2C-like customer experience are key differentiators that allow wholesalers to turn B2B buyers into loyal, happily returning customers.
5 challenges for wholesalers undergoing digitalization
1. Create B2C-like shopping experiences: B2C has set the benchmark for easy-to-use accounts, transparent shopping processes, extensive product information, and personalized offers. Today’s B2B buyers expect the same convenience and frictionless customer experience they know from their private lives - with unlimited access to information, an immediate response to every service request, and the ability to perform all transactions unassisted. This is particularly important in the wholesale industry, where buyers expect sellers not only to supply goods but also to provide digital services which add value (e.g. save time or simplify the purchasing process). Unfortunately, most wholesalers do not meet these buyer expectations yet and have a tremendous need to catch up.
2. New competitors: They are penetrating markets that were previously dominated by wholesalers. Platforms such as Amazon or Alibaba not only have sophisticated digital know-how, an extensive technical infrastructure, and logistical expertise, they also have the necessary financial firepower. This is how they offer a well-developed frictionless buyer journey which differentiates their digital sales channels and attracts traditional buyers of wholesalers.
3. Increasing price and content transparency: The number of buyers who research and shop online is growing steadily within every industry. As a result, customers are aware of what the market has to offer and prices are transparent. They become increasingly sensitive to price, service, quality, and specifically their digital buyer experience. If any of these elements are lacking or diverting too much, the usually tech-savvy and well-informed online business buyer is just a few clicks away from choosing a competitor.
4. Manufacturers selling directly: As manufacturers are the authority in their field, they want to improve the access for consumers or business buyers to information about their products and services. By launching their own digital sales channel they are able to increase reach, open up new markets or expand internationally. As a result, customers might bypass traditional, multi-tiered distribution channels when researching and buying products and services. Since this eats into wholesalers’ revenues, they must develop digital strategies to differentiate in this digital-first world. It is absolutely necessary for wholesalers to focus on their core competencies and to leverage all customer information for developing highly personalized digital web shops or customer portals that make the job of business buyers as easy as possible. After all, the information they have about their customers’ needs and buying behavior, combined with their specific advisory competence, make them stand out from other market players.
5. Decreasing efficiency of traditional processes: Although many companies became successful operating efficiently via traditional processes, that efficiency will decline in relative terms as the world around them goes digital. Speed beats perfection: The faster wholesalers are to adopt digitalization, the faster and more successful they can address new market opportunities in an agile manner. Since the wholesale industry – on average – has a rather low level of digital maturity, companies that embrace digital transformation now will have a clear competitive edge.
A prime example for more efficiency through e-commerce is wholesaler Isero.
6 digitalization benefits for wholesalers
By putting their customers right in the center of their activities, wholesalers will be rewarded with a prosperous business, more efficiency in their processes, higher profits and loyal customers.
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E-commerce will boost wholesale revenue: Price, product assortment and convenience will always remain important, but they are no longer key differentiators. Wholesalers need to be clear on the value they add to their customers – beyond only price and selection. Those traditional differentiators are being disrupted by digital transformation. Wholesalers may risk to lose their customer base and sales to more digitally nimble competitors, such as Amazon Business. Having a digital commerce platform in place will enable them to maneuver swiftly and offer a unique, highly personalized experience via their web shops or customer portals. This is how they can protect their customer base and grow their business.
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Digital sales channels attract new customer segments: Wholesalers should think about leveraging their strengths by expanding your market reach and addressing consumers directly, either through specially created digital solutions or by affiliating with external retail marketplaces. A number of wholesale companies are already demonstrating how this strategy can be implemented. By creating online pure-play spinoffs, they are reaching out directly to consumers with competitive offers and pricing as well as value-added services.
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Digital self-services boost customer satisfaction in wholesale: Today, wholesale customers expect a B2C-like shopping experience offering them maximum ease and comfort when researching and buying products or services. This includes the continuous availability of customer-specific information on products, inventories, and delivery or account status as well as convenient self-service tools that enable customers to manage their own data (company profiles, procurement structures, user roles etc.), products, and service agreements online. By empowering their customers wholesalers will not only meet or even exceed their customers' expectations but also make their job easier. This will increase customer satisfaction – and happy customers are loyal customers!
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Digital after-sales boosts customer service to new dimensions: Paperwork, different phone numbers for different services, limited office opening hours, they are all annoyances and sources of frustration. Consequently, digital sales- and after-sales channels become the primary points of differentiation for wholesale companies and offer many ways to accelerate their service to customers – and thus boost customer loyalty. In addition to customer care, wholesalers can benefit from up- and cross-selling potential as well as a sustainable increase in customer value.
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Digital sales processes increase efficiency: Another benefit of digitalization is the increase of business process efficiency for both wholesalers and their customers. On the one hand, recurring tasks and inquiries can be mapped more cost-efficiently via various self-services reducing the workload of your sales and customer service staff. This opens up possibilities to focus on higher value tasks and demonstrate your consulting expertise. On the other hand, online product and service offerings enable your customers to do whatever they need to do without having to contact a human advisor during regular business hours. This is a considerable time-saver for your clients – and time is money, right?
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Digital service models extend the value chain: Wholesalers traditionally offer a whole range of services, including supply chain management, warehousing, consulting and financing. However, the digital channel is also becoming increasingly important. Through digital services, they can expand their portfolio and position themself as a competent partner of industry and commerce. They could act, for example, as a full-service provider and provide online platforms for smaller (specialist) retailers and manufacturers.
Step by step to digital excellence in wholesale
The good news is that by leveraging their existing core competencies and adopting the right digital strategy, wholesale companies can not only keep pace with the changes outlined above, they can turn them to their advantage. Using a tailored digital strategy in wholesale, it is possible to achieve faster growth, create more efficient business processes, stabilize profit margins, and open up new channels and customer groups. With a clearly defined digital strategy and a clever step-by-step approach, you can celebrate first successes in just 100 days.
The focal point of a wholesale digitalization strategy should be your customers with their various needs and expectations.
When developing such a strategy, it is advisable to define clear digitalization goals: What are your main objectives? Do you want to boost customer satisfaction, reduce costs per transaction or increase sales to the installed base? Or would you rather want to attract new customers online, push high-margin products, expand internationally or achieve a 100 % digitized customer interaction?
The possibilities are manifold and depend on your company’s ambitions, culture, business model and last but not least your digital maturity. Once you have agreed upon the goals of your digitalization process, you can define a range of key indicators (KPIs) so that progress can be closely monitored.
Get practical tips for your wholesale digitalization project to make this transformation a success.
4 proven digitalization strategies for wholesalers
Wholesalers can accelerate sales by catering customers with a B2B commerce platform that is both deeply integrated into all relevant business processes and capable of delivering a consistent and personalized shopping experience across all available touchpoints.
The continuous availability of customer-specific information on products, inventories, and delivery or account status, combined with user-friendly self-service options and 24/7 after-sales service, are just a few examples of the added value that will strengthen and maintain customer loyalty over the longer term.
Here are 4 proven strategies that show how wholesalers can find their place in a digital-first world:
1. Wholesalers can connect directly with end customers via B2C e-commerce.
Wholesalers can leverage their strengths by addressing consumers directly, either through specially created B2C websites or by affiliating with external marketplaces. In many cases, these B2C activities are run under a new company name. By creating pure-play spin-offs with systematic digitalization of all transaction processes, wholesalers can reach out directly to consumers with competitive offers and pricing. To stay cost-sensitive, they should choose a commerce platform that supports B2X commerce. This way, no additional costs arise with a new business model.
2. Wholesalers can establish direct sales to small and mid-sized retailers and trade companies.
Wholesalers who cater exclusively to larger enterprises and industrial corporations can expand their base by selling directly to small and mid-sized retailers and skilled trades, either under their existing brand or using a new company name.
New customer segments like smaller customers are usually served via new subsidiaries/brands, which make effective use of e-commerce strategies to create online offerings tailored to this specific target group.
3. Wholesalers can become full-service providers (marketplaces) for smaller specialist retailers and dealers.
Multi-regional wholesalers and buying associations can help their customers and members compete more effectively by providing access to shared e-commerce platforms. Mid-sized specialty retailers and smaller commercial customers generally do not have the resources to create their own e-commerce solutions. However, using these shared platforms, they can improve customer retention within their region and reach out to new clientele.
4. Wholesalers can become full-service providers for manufacturers.
Given its traditional role with regard to manufacturers, the wholesale industry is ideally placed to offer full-service e-commerce solutions that enable partnered manufacturers to sell directly to consumers. Under this model, the wholesaler takes over complete responsibility for delivery of all services on behalf of the manufacturer, thus providing significant added value.
While manufacturers would have to create totally new structures in order to sell directly to consumers, wholesalers already have these assets in place and can easily make them available as a service. Manufacturers, retailers, and professional buyers can all benefit from the provision of integrated omnichannel services by wholesale companies.
There is no one-size-fits-all solution to speed up the process of digitalization. Every wholesale company needs its own unique strategy that is customer-centric and tailored to its particular value chain. We have a whitepaper where we examine various aspects that are relevant for a successful digital transformation of the wholesale sector. Download it now:
