The industrial market just entered its fifth year of radical transformation, a revolution driven by e-commerce that is shaking up a once sleepy sector.
Suddenly, the space is exciting as distributors realize they have to adapt and respond quickly to supply chains that have been stretched to the point of being brittle. At the same time, they must increase service levels to cater to customers who demand increased accuracy of orders, higher quality products and, they need to be delivered just when needed.
Here are five trends to watch in 2017:
- Buyers increasingly transacting online: It might seem obvious, but e-commerce continues to shake things up. Buyers are increasingly purchasing online, and the type of products they’re buying is moving well beyond small-ticket items and consumables into big-ticket items and equipment. Trends in technology are facilitating this growth because platforms are more feature rich, while being easier and cheaper to implement and upgrade.
- M&A activity remains active: Borrowing money is cheap, making it easier than ever to buy complementary businesses and services to expand offerings as well as to grow geographic territories. (Even if lending rates climb, M&A will continue grabbing headlines because borrowing will still be affordable.) Look for mid-tier-to-large distributors to snap up smaller plays to expand geographic reach and/or to grow product lines.
- Customer expectations increase: The bar will be set even higher as buyers demand increased product offerings, expertise and delivery speed. Businesses are getting squeezed from their customers, pushing them to put pressure on distributors, fueling a vicious loop. Back in the day “donut marketing,” where the sales rep builds a relationship with clerks at businesses, worked fine. That’s no longer the case. Now, the market demands a more experience-based model where buyers are served a rich omni-channel experience.
- New technology improves customer service: Technology will play an important role not only in improving efficiency, but also in providing customer experience at a much higher level. As supply chains are stretched and become more brittle, there won’t be much tolerance for stock outs. New technologies such as smart bins and automated storage and retrieval systems (ASRS) will help ensure minimum inventory levels are maintained as well as ensure orders are quickly and accurately processed and fulfilled.
- Millennials’ influence grows: This new and powerful group of buyers will gain importance as the Baby Boomers begin to retire from the workforce. They prefer to transact on online and are less loyal to distributors that don’t provide a rich online experience. In fact, 85% of millennials indicated that they would leave their current distributor for a distributor who has a better website. This is significantly higher than all buyers (i.e., 72%). They are also more inclined to use marketplaces and to buy directly from the manufacturers. It is imperative that distributors meet the needs of their customer segment.
The industrial distributor space is undoubtedly in for a big year, with change becoming faster than ever, a move started by the internet and the buyer’s demand for a superior customer experience online – as well as offline. It will be exciting to watch all of these forces shape the sector in 2017 and beyond.