Several years ago, retailers stood at a crossroads: With e-commerce and shifting demographics disrupting the once-storied retail business model, they could either adapt or risk being obsolete. Now, distributors find themselves in the same position: They face the most profound business model shift in decades.
Generations of businesses have relied on industrial distributors to ensure they have what they need – anything from a spare machine part to heavy-strength bathroom cleaner. To get that stuff, Baby Boomers chose from a paper catalog distributed by a middleman with an inventory-heavy business model. If the distributor didn’t stock a specific product, chances are the company would just pick something else.
But, as Boomers retire, they’re being replaced by a younger generation that thinks nothing of shopping on an e-marketplace, where choices are plenty, inventory is lean and price-cutting is rampant.
The recently released UPS Industrial Buying Dynamics Study: Buyers Raise the Bar for Suppliers, provides a snapshot of a space rapidly undergoing demand changes and channel shifts: 81% of buyers have purchased directly from manufacturers, up from 64% in 2015, an alarming trend for distributors. Meanwhile, a startling 75% of buyers surveyed have shopped at an e-marketplace, soaring from just 20% in 2013.
Distributors don’t have to lose all hope. The paper identified several ways distributors can modernize. The suggestions are seemingly close to what smart retailers figured out quickly.
Go mobile: Any company not doing this risks being way behind the times and needs to quickly catch up. A website isn’t enough because mobile ordering is the new hotspot. Nearly half of all buyers – and 69% of millennials – indicated they would likely shift business to a distributor offering a mobile app. If you don’t have an app, you risk losing many customers and seeming hopelessly outdated.
Assess the landscape: Who is the competitor who gets it, and how big can that sleeping giant become? Recognize this and consider strategic investments now. Plenty of retailers wish they’d invested in e-commerce and quick shipping far earlier. The UPS paper found that half of respondents plan to increase e-commerce spending, which must serve as a wakeup call to all distributors.
Form a relationship: One and done is no longer enough. Younger buyers want interaction beyond the sale – think of it like the modern version of the frequent-use punch card that keeps customers coming back. The UPS survey found half of the respondents would switch to a supplier offering assistance with returns, training and on-site maintenance or repairs. Thirty-six percent of millennials need services at least once per month, compared with just eight percent of Baby Boomers, according to the study.
Start small: This doesn’t require a massive budget. Ask yourself: Why do buyers choose us over anyone else? Who are our competitors? Who do we aspire to have as customers? Get trading partners, suppliers and logistics partners on board. You don’t have to do it all at once, but you must start.
What dynamics are shifting in your business? Let us know in the comments section below.