Corona has put wholesalers on edge and exposed more than ever the need for digitization and the pain points on the road to a digital future. Almost 48% of wholesalers believe the pandemic has accelerated their digital transformation process by 1 to 4 years. A quarter even talk about 4 to 9 years.
So the momentum is there to start serious work on the digital transformation needed to remain future-proof. What is the new normal in the world of B2B eCommerce? And what is the route that wholesalers have to take on their way to digital maturity? We will explain that in a two-part blog series about the opportunities and challenges of B2B eCommerce, of which this is the first part.
Digitization is putting pressure on traditional wholesalers' business models. Thanks to modern technology, it is becoming easier for manufacturers to bypass wholesalers and sell directly to the customer. This D2C model appeals to many customers. Why? The supply chain becomes shorter and the end product is more sustainable, mainly because it is passing less transport channels.
Wholesalers can capitalize on this trend by becoming digital businesses and extensively digitizing their relationships with customers. A good example of a company that uses digital maturity as the core of its business model is Van Gelder, a wholesaler in fruit and vegetables that supplies various restaurants and hotel chains.
When COVID-19 instantly robbed Van Gelder of 80% of normal business and earnings, the company quickly made sure that its products (which would otherwise rot in the warehouse) became immediately available to consumers. D2C thus acted as a lifeline in times of crisis that prevented the company from going under. There is now a more or less normal flow of income.
The secret behind that rapid adaptation to new circumstances? The availability of an advanced eCommerce platform and the right 'digital mindset' to deploy that technology in an efficient way.
Although Van Gelder's example is undeniably inspiring, it is not typical for this sector. In general, wholesalers are experienced, knowledgeable, well informed and successful entrepreneurs. This is certainly the case in the Netherlands, where the turnover of wholesalers increased by 41 percent between 2009 and 2018. That is more than twice the EU average over the same time period.
On the other hand, wholesalers invest less in their sector than other players within the Dutch economy, while the sector also lags somewhat behind in terms of digital maturity. As a result, there is often a gap between wholesalers and the 'digital-native' millennials (increasingly the policy makers and buyers).
Another pain point is that B2B sellers sometimes think their products are too complex and/or expensive for eCommerce. CheMondis, a company that sells technically complex chemical products, shows with an average online transaction price of 55,000 euros that B2B eCommerce is in practice ready for selling any type of product. In addition, a recent McKinsey study shows that more and more B2B policy makers are willing to open up to (and therefore invest more in) self-service solutions and models for distance selling. The cultural barriers between traditional wholesalers and the digital world are therefore slowly crumbling.
Many wholesalers don't know where to start when embarking on a digital transformation project. The step from a relatively simple, catalog-like portal to a fully-fledged omnichannel offering is complex and time-consuming. Many wholesalers are afraid of making the wrong choice and thus investing in a platform that turns out to be inflexible or scalable in the long run.
Another common problem with wholesalers is a lack of system integration. The combination of legacy core systems and fragmented data sources is a recipe for bad decisions. Successful B2B eCommerce requires synchronized and interoperable systems and application landscapes.
Customized systems and software can be useful, but they can also present themselves as obstacles. Certainly in the case of outdated systems and software, you often see organizations and employees developing routines that circumvent the limitations of technology. This masks a lack of efficiency and makes switching to new solutions more difficult and complex.
Many wholesalers still work with an outdated platform. This makes it impossible, for example, to scale platforms and make them suitable for managing multiple shops or expanding your business abroad. That is disastrous for wholesalers because, certainly in the Netherlands, the largest part of their turnover consists of exports.
It is important that wholesalers overcome the above-mentioned obstacles if they want to grow up digitally. In the next blog we will discuss the benefits of digitization and look at the channels that you can use to increase your turnover.