Suppliers: Get in on the growth of B2B eCommerce!

The Acquity Group just put out the results of a study that indicates that there is a growth in 2013 online B2B purchasing (no big surprise here).  The most interesting conclusion of the study was that while more purchases were being made online, Manufacturers weren’t benefiting from that trend because…well, to put it bluntly…their websites suck.  Their customers were buying online from their competitors who have more “consumer friendly” websites.

This study really hits a nerve for me thanks to a conversation I had with one prospective client this week.  They confessed that they’ve succeeded in shrinking their online repair parts business…which supports a $200M equipment sales and services business…from $3M per year down to $300K over the past few years.  They attribute these fantastic results to a combination of their 12 year old SAP® Internet Sales website that looks and works like it was created at the dawn of the internet age and the “Amazon” like experience their competitors are now offering.

Before I discuss this particular Manufacturer in more detail, let’s take a look at some of the findings of this study in a little more detail:

1. 59% of respondents are purchasing online and 80% of them are doing so up to twice per week.  B2B users are using the web and using it often.
2. Only 13% of the rich buyers (>$500M budget) are buying online from their suppliers.  But 50% of these buyers are buying 90% of their purchases online.  Big spenders want to be catered to…dedicated salespeople, EDI/FAX orders etc.  However, when they do go online, they spend a lot of money but don’t have the patience for a bad experience or poor service.
3. 71% of respondents would increase their online spending if it was easier and more efficient to do so.  There are opportunities to grow revenue from the existing customer base.
4. 71% of respondents value the total website experience higher than loyalty to the current supplier. You can win back your lost customers if you improve the web experience…which includes providing features like real time inventory and shipment tracking, personalized catalogs etc.

Basically this was an interesting study with some valuable insights.  The Acquity Group’s overall conclusion was that if you’re a Supplier (aka Manufacturer), you’re missing out on some real business opportunities if you don’t get on board the B2B eCommerce train.  No arguments from me. :-)

Back to my experience with this prospective client this week.

Indeed what was happening to them was exactly what the folks over at the Acquity Group were suggesting.  Their customers continue to buy repair parts.  They have to, because aging capital equipment needs to be repaired.  But customers aren’t buying from the Manufacturer because they can get a better online experience and deal elsewhere.  This Manufacturer knows they are being threatened and want to upgrade their customer’s website experience.  That’s the good news.

The bad news is that because of internal politics and bureaucracy, they aren’t going to be able to exploit their “unfair advantage” in the marketplace and really crank up the value of their repair parts operations.  The unfair advantages they have are:

• knowledge of the customer (all that wonderful information that resides in SAP®) and
• potential cost savings that their size can afford (bulk buying power, centralized inventory and distribution) and
• knowledge of the product (when will parts be needed, availability of engineering drawings etc.).

What’s really holding this $200M Manufacturer back, is their self image.  They are looking at the upgrade of their B2B eCommerce website as an expense in support of a line of business that currently is generating $300K of revenue.  What they should be doing is looking at the web channel as just another interaction point for their customers who generate $200M of revenue.  What a missed opportunity!  And this isn’t the first time that I’ve seen this myopic view of a repair parts business.

The moral of the story?

If you are a manufacturer who has a repair parts business, don’t think like a monopolist.  Think like an entrepreneur. Innovate.  Exploit your unfair advantages as a Manufacturer and make the investments required to provide your customers with an experience that will make them loyal to your entire brand…not just your repair parts business.

If you think you are “entitled” to your customer’s business because you are the Manufacturer, think again.  They have options.  Just Google any one of your products and see how many places they can be purchased online.  Besides, that $3M business withering into a $300K business isn’t just about losing $2.7M in revenue.  It’s about jeopardizing the satisfaction of customers who are responsible for your entire $200M business.  That’s a risk too big to take.

Take advantage of all of the information you have in SAP® about your customers and distribution processes and extend that to the web channel.  They will love you for it and reward you with their loyalty…until the next “killer feature” rolls around. :-)

Remember, think like an entrepreneur.  Innovate.

We can help.

Sam