Mike Zhang shares an article on digital disruption for Industrial B2B business.
The Industrial B2B business, aka industrial distribution business, has always been seen as “an old man business” in which your business grows as your years in the network, together with your grey hair. This is one of the most traditional business in the industry field until recently, the evolution of multi e-channels have tremendously disrupted this business model thanks to technology advancement. The emergence of new channels and the available e-channels have sprung up like mushrooms.
The reluctancy from distributors is still obvious whilst some distributors who embraced digital distribution in the early stage have already achieved economies of scale and boosted both sales and company valuation in an unprecedented speed.
The core value to end customers are clear, that is easier, faster and cheaper to get products. Product vendors rely on e-channels as they try to grow into new geographies and scale their business.
The essence relies on holistic disruption of traditional channels.
Small distributors realize that their competitor is armored with machine guns after digital sales implementation, how could they possibly win the war with only old rifles?
The e-channels are dominating the end market as well as the interface with customers. With the capital support, the e-channel top players are merging quickly or building alliances to create a giant monster. To beat the competition, the e-channels are investing heavily on activities around customer centricity which includes but not limited to designated customer service or sales engineer for one Key account, customized catalogue and etc. All data relating to browsing and buying activities will be analyzed for further marketing. The product brand companies simply cannot reach this level to their own customers since the core of e-channels business is customer service so the spend on customer service is so much higher than various brand vendors to its end customer so that it makes sense for the brand to rely on channels to service their customers. When the model has started to surface, we have noticed the two scenarios:
1, For generic products, the e-channels become the “brand” as the customer rely on their recognized e-channel to choose their daily needs, in MRO/industrial goods, that will be general hand tools, standard fasteners, stationary and all these are like groceries for a household that customers rely on the e-channel for recommendation and selection. Gone are the days when the uncertainty is around the product performance so the brand is the promise.
As now the e-channels are having so much influence on generic products to the end users, the e-channels are also leveraging their brand and buying quantity to produce their own brand products from OEM.
Key points include:
- Disrupting the channels
- E channels for generic products
- Engineered/function-specific products
Read the full article, The B2B E-channels, friend or foe?, on LinkedIn.