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Millennial Buyers Create Ripples in Distribution Model

It’s common knowledge that e-commerce continues shaking up the retail model, but what’s less known is that this disruption is rippling further up the supply chain. Distributors, who have played an essential role connecting manufacturers and consumers, are being upended more rapidly than previously thought. They must quickly recognize threats and adapt.

 

That’s the theme of a white paper distributed by UPS today. This report, the third such study compiled since 2013, captures a sector rapidly undergoing demand changes and channel shifts: 81% of buyers have purchased directly from manufacturers, up from 64% in 2015. (The web makes that extremely easy these days.) Even more shocking, 75% of buyers surveyed have shopped at an e-marketplace, soaring from just 20% in 2013. Most buyers are likely to shift to suppliers with a more user-friendly web presence. 

This means that distributors, which have long relied on old-fashioned sales tools like paper catalogs and typically eschew a digital presence, face mounting risk. They’re particularly being rocked by millennials, who are bringing their tech-savvy and nontraditional purchasing habits – for example, bypassing the middle man and working directly with the manufacturer – with them into the workplace. The impact on the future of industrial products purchasing may be among the most profound of any modern generation of buyers and provide a glimpse of the future.

We offer four pieces of advice:

  • Recognize rising threats : It is imperative to consider strategic investments that bring services to parity with competitors. The paper found that more than half of respondents working primarily with distributors intend to increase e-marketplace spending, representing a looming risk to distributors.
  • Think digital : Online channels are a necessity and distributors need to strengthen e-commerce capabilities, particularly for mobile ordering. Thirty percent of corporate buyers use mobile channels to order industrial products, and 24% are “extremely likely” to do so in the future. Nearly half of all buyers – and 69% of millennials – indicated they would likely shift business to a distributor offering a mobile app.
  • Address buyers’ needs by product : Partnerships can help make businesses more competitive. Look into purchasing insurance on products and shipments to mitigate risk and to help protect and improve cash flow; leverage a logistics provider’s global network to ramp up service more quickly and reach more pockets of growth.
  • Go beyond the sale : Buyers want interaction beyond the sale (i.e. post-sales support), with half of respondents stating they would switch to a supplier that offered 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.

By changing with the times, distributors don’t necessarily have to face being bypassed. What changes do you see in what customers want from distribution? Let us know in the comments section below. 

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