Buying Groups Help Distributors Compete Against E-Tailers
- Giving Jan/San Distributor Sales Representatives An Edge
First, it was a ring of the phone or a handshake.
Now, it’s just a few clicks.
Where buyers once had to speak with someone to make a purchase, now all they have to do is open their laptops. When Sanitary Maintenance spoke to several buying group leaders during a panel discussion last year, they cited threats from e-tailers and big-box stores as one of the biggest challenges facing their members.
While it’s true that eight in 10 Americans shop online, a report from the Pew Research Center shows that 64 percent of Americans prefer buying from physical stores to online, when everything is equal. Why? Because it gives them the ability to touch and feel the item they want to purchase. For larger purchases, it can also offer the ability to discuss features and benefits with someone who knows the product.
But as any jan/san distributor knows, it can be tough to make things equal, as the overhead of a warehouse/office building, labor and inventory can add up quickly and impact margins. Although relationships are still critical, some distributors simply don’t have the means when it comes to accessing pricing and digital resources needed to compete in an e-commerce world.
Recognizing this, buying groups are aligning resources to help their members succeed. From providing access to lower-cost goods, sales training and new digital marketing and procurement tools, the goal is to level the playing field so distributors can deliver “more than a box,” and show their value over e-tailers and big-box stores selling on price and convenience.
Key Challenges Ahead
According to Forrester Research, business-to-business e-commerce is on course to hit $1.18 trillion by 2021, with an average growth rate of 7.4 percent each year. It’s visible in all industries. For example in foodservice, customers used to call a restaurant to place an order, but now more are ordering online.
The cleaning industry’s growth is no different, but studies show that a majority of end users prefer to order cleaning equipment supplies the old-fashioned way. The “2017 Facility Cleaning Decisions Reader Survey” shows 68 percent of facility cleaning managers make purchases in person, by e-mail or phone through a distributor. Only 19 percent purchase through retail or a big-box store. The “2017 Report On The Building Service Contractor Market” shows similar results for BSCs: 64 percent purchase products from a distributor, while 19 percent use a retail store or wholesale club. Only 5 percent use an e-tailer.
But purchasing preferences are changing, for a number of reasons.
First is the widespread use of technology among younger generations — particularly Millennials who make up one quarter of the U.S. population. The first generation to grow up with the internet, they will soon be filling the positions of retiring Baby Boomers. Michael Wilson, vice president of marketing and communications for AFFLINK, Tuscaloosa, Alabama, anticipates that this more technically savvy audience will drive the growth of online ordering in the cleaning industry.
“Facilities maintenance distributors have a significant gap to fill as it relates to meeting customer demands for the future,” he says. “Research shows that in the next decade, three out of every four employees in the B2B space will be Millennials. To remain successful, we have to reach them where they are — online.”
Online ordering isn’t everything — more users are looking for a “self service” experience when it comes to procurement. Rather than waiting on someone to send a product brochure, they want to download what they need from a company website. This trend is anticipated to drastically change the role of a sales representative. In fact, Shopify reports customers are 57 percent of the way through a typical purchase process before contacting a sales representative.
That’s what’s made the growth and investment from e-tailers and big-box stores so appealing to end users, says Zachary Haines, CEO of DPA Buying Group, Cincinnati. Their easily navigable platforms provide users with the information they need along with a great experience. This has led to an increase in use.
“The ‘big boxes’ have invested a tremendous amount of dollars in developing robust commerce platforms and rich content,” he says. “Amazon is driving change at an incredible pace.”
However, the challenge isn’t based on technology alone. Big-box stores and online marketplaces like Amazon are aggressively targeting businesses. Eric Flinton, president of Triple S, Billerica, Massachusetts, says these businesses have coupled robust platform development with effective selling.
“[Non-traditional competitors] have done well moving to different levels within an organization,” he says. “We see them communicating beyond facility managers and using procurement agreements within business offices. They’re taking the conversation up a level.”
Giving Jan/San Distributor Sales Representatives An Edge
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