Although it’s been around since the 1990s, e-commerce hasn’t been a widely adopted tactic by distributors – until recently.
According to the fourth-quarter 2013 MDM-Baird Distribution Survey, 70% of distributors plan to invest in e-commerce in 2014. 52% of distributors with e-commerce solutions said that it contributed less than 5% of their revenue. This clearly shows that e-commerce provides benefits to distributors beyond just revenue generation. One of the additional benefits it brings is that it increases productivity.
E-commerce helps distributors be more productive by:
1) Increasing the productivity of people: Depending on the type of distribution organization you are running, labor compensation take 60% – 65% of your gross profit. Therefore the more productive your employees are, the more you can control your labor costs and continue conducting business with the same or even a reduced staff. Having an integrated e-commerce solution reduces the amount of time wasted by the manual re-entry of data.
2) Enabling seamless integration: Don’t get bogged down with the expense and inefficiency of maintaining too many databases. If you are maintaining a customer database and a product database in your e-commerce system in addition to a customer database and a product database in your back office system, then you are opening yourself up to errors and extra costs. You can eliminate a lot of these headaches by integrating your e-commerce solution with your other business management systems.
3) Improving accessibility: Business and customer data needs to available to right employees when and where they need it. An integrated e-commerce system can deliver that information into the organization’s CRM system and ERP system so that everyone who needs to access the data has it available (with the appropriate permissions).
4) Making flexibility a reality: It’s very important that distributors stay flexible so customers have options for how they want to place an order. Maybe last week it was easiest for them to visit your website and place an order online, but tomorrow they might be on the road and realize they need to order more products, so they call your phone center. E-commerce makes the flexibility a possibility.
5) Controlling your cost of service: In order to control the cost of serving your customers, it is critical to map out the cost to serve each customer, highlighting the services they’re willing to pay for. Don’t continue providing services the customer ultimately doesn’t want or need. Instead consider rethinking a pricing program, an e-commerce distribution channel, or altering shipping and handling costs.
6) Making it beneficial to use third-party of fourth-party logistic providers: 3PLs or 4PLs should be considered for e-commerce fulfillment. These public warehouses make shipments for you, but they do it in your name. To the customer, it appears that the product came from the distributor, but it was actually fulfilled and shipped by a 3PL or 4PL. While the 3PL or 4PL may handle all the parts, you still handle the back-office details.
To see if an e-commerce solution is the right fit for your organization, request a Distribution Strategy Assessment today!