The Wholesale and Distribution Digital Commerce Playbook

Abstract

Wholesale and distribution is a vast and growing global industry, struggling to digitize and keep up with rapidly changing customer demands. Learn about the industry's major challenges, and more importantly, the digital commerce solutions to ensure your business stays competitive.

The status quo of the wholesale & distribution industry

Wholesale and Distribution (W&D), sometimes used interchangeably, refers to any business that buys products from manufacturers and sells them to retailers and other companies instead of Direct-to-Consumer (D2C). The sector covers a range of industries, from food and beverage to electronics, and pharmaceuticals to machinery. It’s a humongous market, expected to grow globally to more than 61 billion USD by 2027, ripe with opportunity for players who stay ahead of the curve.

However, while the industry is large, diverse, and growing, it’s facing universal disruption. The 'Amazon Effect' has been plaguing the industry for years. More recently, the covid-19 pandemic and geopolitical instability have wreaked havoc on W&D. Weaknesses in supply chains were revealed, and consumer demands have evolved beyond what most traditional businesses can keep up with.

As the majority of W&D companies serve businesses rather than the end consumer, B2B buyers' rising expectations regarding customer experience and digitization mean that digitally-native new market entrants offer tantalizing and competitive opportunities to your customers. To ensure the ongoing success of your business, you must embrace an agile mindset, and open the doors to new technology, or risk being swallowed up by your smarter, faster, younger opponents.

Customer example

This is exactly what our customer Sourceability has done. A global distributor of electronic components, Sourceability was named on the list of 5,000 Fastest-Growing Private Companies in America. They’ve recently hit new heights in revenue and attribute their success to their digital ecosystem and B2B marketplace.

Challenges facing wholesale & distribution

Only by fully understanding the hurdles that lay before you can you begin to tackle them. Below, you’ll find an outline of the major challenges facing W&D right now.

Low digitization

In today's business world, digitization has become crucial for businesses to streamline operations and improve efficiency. 91% of B2B buyers prefer online purchasing. However, despite its importance, many sellers and buyers still prefer traditional offline business methods, leading to low digital adoption. This has significant implications for both sellers and buyers. 73% of B2B buyers are now millennials, and they expect a sleek, digital user experience. Buyers will purchase where they receive the most personalized offers and convenient experiences, and if that isn’t your business, then you’re losing market share.

The younger workforce entering the market is also more familiar with digital tools and processes, and may find working in an analog environment frustrating. This can lead to a lack of process adoption, employee churn, and labor shortages. Change management can also be a significant issue in such cases, as resistance from leadership further impedes the company's digital evolution. Furthermore, the lack of connection between strategy and operational decisions can result in workflow inefficiencies, ultimately impacting the bottom line.

In short, low digitization:

Results in a younger generation leaving the workforce if they are not equipped with the tools to do their work correctly.
Impacts the customer experience, particularly with younger generations becoming buyers.
Leads customers to have low visibility into their relationship with sellers, resulting in errors and lost sales opportunities.

Inefficient sales processes

Ineffiencies cost organizations 20-30% of their revenue each year. Most W&D companies operate with sales processes that haven't been updated in decades. 32% of supply chain executives reported that updating legacy systems was a major challenge standing in the way of getting their B2B online. They're chugging along with aging digital tools, making competing with more digitally mature businesses difficult. The traditional sales structure is problematic as younger workers struggle to fit in, leading to high turnover rates.

On top of this, deals with manufacturers are incredibly complex, with a high potential for pricing wars and fragmented pricing. W&D companies might also be wasting time on small accounts and non-valuable tasks, hindering them from adapting to industry trends. They must adopt a more proactive approach, focusing on a long-term vision rather than merely reacting to problems and tasks.

In short, an inefficient sales process:

Wastes valuable resources, including time and money.
Hinders innovation, as manual tasks are time-consuming.
Makes it easy for more digitally mature competitors to race ahead of your business.

Poor customer experience

Poor customer experience is a significant challenge faced by W&D businesses, particularly large international organizations with multiple verticals that serve both B2B and B2C customers. Addressing this can be tricky since technology adoption rates vary by region and industry.

Throw into the ring that customer behaviors and expectations are changing rapidly, and the issue of slow adaption is highlighted even further. 51% of B2B companies avoid vendors after a poor customer service experience, so it can have a real tangible impact on your bottom line.

The end consumer wants quicker and more diverse delivery options for sustainable and ethically sourced products. Businesses, therefore, must be prepared to source products from multiple suppliers to meet customer demand. B2B buyers are increasingly expecting a B2C-like experience, with a growing preference for digital solutions and 24/7 service.

In short, poor customer experience:

Results from changing customer demands, in both B2B and B2C.
Is exacerbated by a lack of digital adoption.
Poses significant challenges the more verticals and regions you serve.

Hot competition & rise of D2C

Young, digitally-native competitors are reshaping the landscape for W&D. With a focus on customer centricity, they're built to accommodate new customer needs and offer a much better user experience than old incumbents. The e-commerce and online shopping world has made it far easier for customers to compare prices and find cheaper alternatives to brick-and-mortar stores, making the overall market much more competitive. Today, you're not just competing with local businesses, but with the entire world.

In addition, the rise of direct-to-consumer (D2C) sales means that manufacturers are looking to provide a better customer and product experience to deliver a better return on ROI while collecting valuable customer data. More than 80% of end consumers are expected to make at least one purchase through a D2C brand within the next 5 years. Digital solutions have reshuffled the cards, increasing accessibility of cheaper, international offers, and paving the way for new business models like marketplace and pure-players.

In short, hot competition is driven by:

Customer-centricity taking center stage, offering a better experience for your customers.
A global market, offering cheaper, better alternatives than brick-and-mortar.
The rise in D2C meaning manufacturers are bypassing distributors.

Supply chain disruption

A few years ago, the phrase 'supply chains' was only known to those in the business world. The covid-19 pandemic and other global news stories, such as the Suez canal fiasco, brought supply chains into everyday conversation, as empty supermarket shelves made the concept of supply chain disruptions a reality.

The entire business world is still facing challenges relating to supply chains, some related to macro events and others to market trends in general. Stock issues, such as component disruptions, low margins, and constant product evolutions, make it difficult for businesses to maintain inventory. The shortage of components has led to the rising price of goods as demand has increased. With it have come rising fulfillment prices, making it difficult to predict the future.

The growing concern about the environment is shifting businesses toward more sustainable practices, as companies look for ways to reduce their carbon footprint, recycle resources, and use eco-friendly materials in production. 46% of consumers expect brands to take the lead on creating sustainable change. All of this has increased the need for transparency in the supply chain, where businesses are now expected to disclose their material's origin and production methods.

Additionally, B2B buyers are becoming more demanding, expecting a better digital experience during procurement. They want a hassle-free, user-friendly experience when ordering products, tracking shipments, and making payments.

In short, supply chain disruption is due to:

Stock issues and rising prices, making it difficult to plan and predict for the future.
Sustainability trends, regulation and new practices.
B2B buyers expecting better customer experiences.

Poor data management

Every year, poor data quality costs organizations an average $12.9 million, according to Gartner. While data management is a massive topic for all businesses, the W&D industry is remarkably far behind when it comes to leveraging data. There are three main components to this: lack of customer data, traceability issues, and data integrity issues.

The lack of customer data can make it challenging for wholesalers and distributors to predict demand and support an effective sales strategy. Without sufficient customer data, businesses in the industry may struggle to optimize their inventory, resulting in either excess stock or stockouts.

Traceability is critical for maintaining the quality and safety of products. Issues in this arena can cause delays, lost products, or product recalls, resulting in unhappy customers, reputational damage, and potential legal consequences.

The W&D industry often handles large amounts of data, which is where integrity issues come into play. Data accuracy, consistency, and security are crucial for making informed decisions and maintaining customer trust. Data integrity issues can result in errors in inventory management, inaccurate pricing, or compromised financial data, which can have severe consequences for the business.

In short, poor data management leads to:

Ineffective sales strategies and under-optimized inventories.
Bad customer experiences as the quality and safety of products can suffer.
Uninformed decision-making and low customer trust.

The bottom line – challenges facing wholesale & distribution

The wholesale and distribution industry faces a range of challenges that must be overcome to remain successful in this increasingly competitive space. These hurdles include low digitization, inefficient sales processes, poor customer experience, the rise of D2C sales, supply chain disruptions, and poor data management. Failure to address these issues will leave your business on the back foot with new, digitally-native competitors, poised to take your spot in the market.

Let’s investigate how to tackle these challenges with digital commerce technology.

Four digital commerce opportunities for wholesale & distribution

There are two kinds of people in this world: those who see the glass as half empty, and those who see it as half full. The challenges facing W&D might seem daunting, but they should be viewed as opportunities rather than unsolvable problems. Here we’ll outline four ways digital commerce technology can offer your business a new avenue for every challenge you’re facing.

Combat low digitization with an MVP

A lack of digital maturity is a very common problem facing wholesale and distribution businesses, and it can seem daunting to launch into a full-scale digitization project. By taking a minimum viable product (MVP) approach, your business can start slowly and introduce new features and capabilities into your digital transformation at a sustainable pace. This gives your workforce and company culture time to adjust to the new status quo, but also helps you to get going quickly, without taking on too much risk or committing too many resources at once.

By starting with a small-scale pilot project or proof-of-concept, you can get a sense of what works and what doesn't, and make adjustments as needed before investing heavily in a larger-scale digital transformation initiative. You’ll be able to build momentum and support for digital transformation within the organization by demonstrating tangible results and showcasing its benefits. Over time, you’ll be able to gradually work towards a more digitally mature organization, which is essential if you want to be competitive in today’s market.

More efficient sales processes with a digital self-service portal

Clunky, manual sales processes are holding your company back from success, and making it even harder for you to attract new blood into the business. A digital self-service portal is one solution to this challenge – an online platform that allows customers to access information, complete transactions, and manage their accounts autonomously. 41% of B2B buyers say self-service functionality would make it easier to do business online.

By enabling customers to self-serve, they can explore and purchase a wide selection of products at their convenience, without relying on salespeople. A product configuration tool can allow customers to create or select complex products, further streamlining the process. Automated order replenishment helps reduce errors and delays while ensuring customers always have the products they need.

A huge benefit to a customer portal is the added transparency. With live tracking and notifications, customers can follow their ordering journey from start to finish. It need not be something that salespeople fear. By enabling customers to self-serve for simple transactions, salespeople can focus more on building relationships and providing personalized support for more complex cases. This improves overall customer satisfaction and loyalty, freeing time for salespeople to focus on higher-value activities.

By leveraging self-service capabilities, businesses can vastly improve inefficiencies in the sales process.

Transform customer experience to beat the competition

Improving customer experience can be the key to gaining an edge in the market. Your customers often face a multitude of disconnected wholesalers and distributors, making it challenging to locate service providers and assess their quality. Therefore, creating a customer-centric digital experience via a customer portal can help your business to stand out.

A B2C-like buying experience, including direct self-service buying, shopping cart, and order history, can make customers feel valued and respected. In fact, 66% of B2B buyers prefer a remote human interactions or digital self-service. Additionally, enriched and tailored catalogs with better categorization, data attributes, and embedded data sheets and specifications can help customers find the right products more efficiently. Personalized product suggestions and immersive experiences, such as configurators, CAD, and AR, can further improve the customer experience.

A customer portal enabling pre- and post-sale ordering can facilitate communication between customers and service providers. W&Ds can leverage digital tools via the customer portal, such as CRM, business intelligence, data automation, and reviews, to streamline their operations, gain insights, and better serve their customers. Businesses can deepen customer engagement and loyalty by offering subscription services and targeted marketing.

D2C is an opportunity, not a death knell

It's crucial for wholesale and distribution businesses to understand the direct-to-consumer trend, the benefits for manufacturers, and how it impacts the industry. While D2C may threaten the traditional W&D model, there is also an opportunity for you to partner with manufacturers and share the increase in reach and access to customer data.

W&Ds should also investigate launching a D2C channel through an independent marketplace, helping your business to create more personalized buying experiences for your customers. You can access customer data directly and gain insights into their preferences and buying behavior, which enables you to tailor marketing and sales strategies. Going D2C can address the challenge of losing customer data and order history by providing a single point of contact for customers, ensuring a seamless and tailored buying experience.

The bottom line – digital commerce opportunities

In conclusion, wholesale and distribution businesses face a variety of challenges, but by adopting digital commerce technology, they can transform those challenges into opportunities. Starting with a minimum viable product and gradually introducing digital self-service portals and customer-centric experiences can greatly improve efficiency and customer satisfaction. Additionally, understanding the direct-to-consumer trend and exploring opportunities for partnerships and independent marketplaces can help W&Ds access customer data and create more personalized buying experiences. By embracing digital commerce, W&Ds can stay competitive in today's market and position themselves for future success.

Jörg Oberdieck

Customer Success Manager & Senior Business Consultant at SQLI

SQLI Digital Experience, one of Spryker’s partners, defines, builds, and grows digital business value for top brands around the world. We asked Jörg Oberdieck to give us his expert opinion about the wholesale and distribution industry.

SQLI Website

What are the biggest challenges the wholesale and distribution industry faces, and how can they be solved?

[JO]: One of the biggest challenges facing W&D is the need for personalized customer journeys, incorporating relevant and requested information for the customer. A CDP (Customer Data Platform) can support companies with this challenge by delivering relevant and personalized information to their customers. But – this also requires some kind of marketing information and the willingness to implement end-2-end processes with a consistent customer journey to provide added value for the end customer.

What are your predictions for the key trends and the future of wholesale and distribution?

[JO]: The overall processes within this industry will become more and more personalized with deeply integrated processes across organizations. Direct shipping and marketplaces will increase especially, meaning companies need to be prepared for this – process and infrastructure-wise.

How do you think digital commerce technology will play a role in the future of wholesale and distribution?

[JO]: When we talk about integrated processes across organizations, a solid and flexible digital commerce technology solution is a must-have. Without it, companies will fail and their revenue will decrease, without a doubt.

How are data and analytics important for the wholesale and distribution industry?

[JO]: Data and analytics can support companies to optimize their processes. On the one hand, they can detect areas of weakness within their value chain, on the other hand, data and analytics can help them to be prepared for upcoming events or peaks.

How can a wholesale and distribution business successfully digitize?

[JO]: The customer needs to be at the center of any process. Deliver outstanding processes with added value for the customer. Rethink and digitize existing processes, collect data, provide personalized information, and outstanding service.

How Spryker can help you

Spryker is here to help you future-proof your business. Our sophisticated transactional commerce technology can enable every digital commerce solution outlined in this wholesale and distribution playbook, from launching an MVP with our composable commerce solution, to a self-service or customer portal, or a marketplace. Our industry experts are here to guide you through the challenges facing W&D to ensure you stay agile in this rapidly evolving market.

You can learn more about W&D solutions by exploring our use cases, such as lowering operational costs through a self-service portal and order process automation.

Conclusion

Wholesale and distribution is facing myriad challenges related to low digitization and changing consumer behavior, but with the right approach, these issues can be viewed as opportunities for your business to adapt and succeed. Discover more about how Spryker can solve W&D-specific challenges and opportunities, such as launching a B2B marketplace, here.

About Spryker

Spryker is the leading global composable commerce platform for enterprises with sophisticated business models to enable growth, innovation, and differentiation. Designed specifically for sophisticated transactional businesses, Spryker’s easy-to-use, headless, API-first model offers a best-of-breed approach that provides businesses the flexibility to adapt, scale, and quickly go to market while facilitating faster time-to-value throughout their digital transformation journey. As a global platform leader for B2B and B2C Enterprise Marketplaces, IoT Commerce, and Unified Commerce, Spryker has empowered 150+ global enterprise customers worldwide and is trusted by brands such as ALDI, Siemens, ZF Friedrichshafen, and Ricoh. Spryker is a privately held technology company headquartered in Berlin and New York backed by world class investors such as TCV, One Peak, Project A, Cherry Ventures, and Maverick Capital. Learn more at spryker.com.

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The Wholesale & Distribution Playbook