The corona pandemic forced wholesalers and brand manufacturers
to think on their feet and re-strategize their sales channels. This is the
overarching message for the coming year: that B2B has to find a way to
talk and sell directly to its end-customers.
When we attempted to make sensible predictions about the direction
of eCommerce this time last year, we had no idea that in a matter of
weeks the world and the world of eCommerce as we knew it would
change irrevocably.
An earthquake is not a trend, but when they happen people and
businesses have to-and do-adapt. This is what happened during the
pandemic. It became clear early on during the first wave of lockdowns
that those businesses best able to pivot (and call on the best
technologies to help them do so) would not only be able to survive the
crisis but emerge stronger from it.
The trends we look at in this white paper live under the shadow of
Covid-19. Some, such as direct-to-consumer (D2C), was the smart
response of agile wholesalers. D2C is a response to the growing
consumer demand for provenance and sustainability, which is
propelling ‘recommerce’, the online trade in used products, to the
mainstream.
As trade fairs and sales lunches became impossible, B2B businesses
had to tell their stories digitally and invest in their digital channels
to do that. One such channel, the marketplace, seemed to offer B2C
and B2B a shortcut to attracting customers no longer able to go out
to shop or pay a visit to a trade fair stand. Headless eCommerce was
as much of a buzzword as ever but no easier to execute especially as
businesses were forced to work remotely.
We shall begin by exploring the effect of the pandemic on eCommerce
activity, and then discuss where we believe eCommerce will be making
its most crucial decisions in the coming year.
How are the shock waves of Covid-19 being felt
in eCommerce? The immediate effects were clear
in B2C immediately: overall sales dipped at first
as the travel and holiday sectors - important
components of B2C - saw revenues fall off a cliff.
Consumers re-allocated budgets and invested in
their homes as a comfortable and highly personal
safe space. Figures from the Netherlands tell
that story. Since restrictions were imposed,
online spend on gardening went up 54%. The
Dutch invested in kitchen appliances (up 57%)
and hobby articles (up 44%). The sector that
experienced the biggest growth in B2C was toys,
which shot up 63% as children could not go to
school or into childcare, yet had to be kept busy
somehow!
The eCommerce sector that was boosted most
by the corona crisis was hardware and building
materials (74%) which is largely in the hands of
wholesalers and distributors, and so falls under
B2B.
Because B2B sells in bulk on often long-term
contracts, the effects of Covid-19 on its turnover
are trickling through slowly. However, there is
more of it: a recent survey from the Netherlands
shows that the number of B2B buyers who have
made a purchase (or committed to one) on an
eCommerce channel rose 9 percentage points to
48% in 2020.
Retail and hospitality were the most directly
affected by the lockdowns, as from one day to
the next, its main sales channels disappeared.
However, the pandemic was a huge wake-up call
for all of eCommerce, with many wholesalers and
brands ramping up investment in digital channels
to compensate for the disruption to non-digital
sales and marketing channels. Traditional sales
operations had to find different ways of winning
new business because a significant proportion
of B2B leads and prospects comes from trade
fairs where you communicate your brand directly
to potential purchasers visiting your stand. That is no longer possible. Businesses have to tell
their story digitally, through great content and
photography, and through a vivid presence on
social media.
This is easier for some sectors than others. The
B2B furniture and accessories trade was heavily
reliant on annual trade fairs such as Maison et
Objets in Paris. Nothing can quite replace the
experience of a face-to-face trade show, and there
is no real alternative yet. But what is happening is
that B2B is diverting travel and exhibition budgets
to optimize and extend the performance of digital
channels in place already.
One such sales channel was a trend we
highlighted for 2020: direct-to-consumer (D2C).
While we did not call it wrong, D2C turned out
to be more of a dire necessity than a trend,
and really the only means of survival for many
wholesalers.
As we look ahead to 2021 and beyond, we shall
start with D2C.
This was the predicament facing B2B wholesalers
in March 2020, when Europe imposed the first
wave of lockdowns: its products were there; its
consumers were there but the pandemic had
disrupted its main sales channels.
Van Gelder, a Dutch wholesaler in fruit and
vegetables for a network of restaurants and hotel
chains, saw 80% of its business go overnight. The
business acted swiftly to open up a D2C sales
channel, making its high-quality, fresh produce
available directly to the consumer. Van Gelder’s
eCommerce platform easily accommodated the
additional channel, yet the D2C experiment had
to be planned carefully. The wholesaler had to
formulate B2C-like pricing and payment options,
and broaden its fulfillment operations because it
was used to expedite its produce in bulk. It also
had to keep its existing customers in the loop and
explain to them what was happening.
For Van Gelder, D2C proved a lifesaver and an
additional stream of income which it intends
to keep open when ‘normal’ trade resumes,
whatever this new normal will look like.
The Van Gelder experience shows two things:
The reflex of many B2B businesses has been a
flight to the safe haven of the marketplace, when
the smarter option might have been to invest in
their own brands and their own channels - D2C is
a good example of that.
The benefits for B2B of selling directly to its
end consumers are obvious: by cutting out the
middlemen, it has a cheaper product, one with
higher margins, or both.
A strategic, longer-term benefit is that you are
finally talking to the end users of your products,
and not merely to the businesses that transport
them, warehouse them, or retail them. This is
transformational. The traditional B2B wholesale
model denies most businesses direct insight into
the end consumer’s experience of its products,
making them slow to react to changes in the
market. D2C allows you not just to sell directly to
consumers, but also to hear directly from them
what they need from you.
The business model of the marketplace could
hardly be more different: here, the customer
journey is not controlled by you and this dilutes
your brand as price becomes almost the only
differentiator. What is more, your customers
do not belong to you; they (and their data) now
belong to the marketplace.
This tricky marketplace dynamic is Trend 4 in our
list. Before we go there, we look at a business
model that is going big in 2021: recommerce, the
online trade in used products.
Sustainability is now driving purchasing decisions
among mainstream consumers, underpinning
the D2C trend and supercharging the growth of
recommerce sites.
Millennials are used to buying and selling clothes
on peer-to-peer sites such as Vinted, and enjoy
curating vintage looks on Instagram. Secondhand, long seen as a ‘poor’ option confined
to thrift shops, is now a badge of pride with
shoppers. In a guilty vs proud barometer from
a recent survey, ‘buying second-hand’ scored as
high as ‘adopting a puppy’ (with ‘buying fast food’
or ‘fast fashion’ inspiring the most guilt).
Celebrities such as Gwyneth Paltrow turn up
for award ceremonies in second-hand clothes
- vintage Valentino admittedly - and nothing
screams ‘trend’ more loudly than a Kardashian
business venture. In 2019, the clan launched an
apparel resale site called Kardashian Kloset.
This is translating into big business. In 2019,
resale grew 25 times faster than the broader
retail sector (49% vs 2%), and in a forecast made
months before the outbreak of Covid-19, the
resale market was set to grow from $6bn to
$36bn in 2024. Massive brands such as Reebok
and Walmart have launched digital channels for
reuse or resale shopping.
Demand needs supply with retail customers
selling on clothes to resale sites. The untapped
potential is enormous: 82% of US consumers
have never resold clothing, but 67% of that
segment is open to doing so.
The economic uncertainty created by the corona
pandemic is certain to amplify the attractions of
recommerce. Prediction: 2021 is the year when a
smart eCommerce marketplace will disrupt this
exploding and lucrative market segment.
The marketplace is our next trend.
In Germany, Amazon accounts for almost 50%
of online retail sales, so brands have no option
but to join; the alternative is missing out on half
your market. Although Amazon is beginning to
flex its muscles in the Netherlands, B2C sales are
more fragmented with the market leader bol.com
taking 25%.
Dutch brands are wary of the German example,
where they see Amazon copying successful
brands. That is the sword of Damocles that hangs
over your head of every mid-market brand that
puts itself on a marketplace.
Amazon is also using its awesome technology and
infrastructures to grow market share in B2B. In
2019, net revenue of Amazon Business rose by
60% to $16bn, and in the US, less than five years
after launching, it is in the top five for every B2B
vertical where it is active.
Just as we saw with B2C, the growing dominance
of Amazon (and Alibaba) in B2B is not deterring
other entrants. In 2010, there were just 20 B2B
marketplaces in Europe; now there are estimated
to be over 300. It is instructive to analyze in which
sectors these are gaining the largest foothold.
Roughly 20% are contractor marketplaces; the
second-largest sector (18%) is logistics services
such as freight and warehousing. These verticals
tend to be highly localized which means there is
less pressure on the brand ‘to cut through’.
Joining a marketplace means surrendering your
autonomy as a brand. The marketplace is not
interested in what makes you unique; on the
contrary, it has to create a level playing field
where every B2B seller presents its products
in the same way. In addition, you pay a fee on
every sale, sometimes quite a hefty one "fees on
Amazon Business range from 5% to 47%".
Can B2B businesses thrive outside a marketplace?
Absolutely they can. By investing in your own B2B
channels, you can outperform your competitors,
and outperform marketplaces.
The key is customer experience. B2B is pricesensitive but this is not always decisive. Most of
all, B2B buyers want a frictionless experience. In
B2C, researching the best price for a pair of jeans
is part of the fun, and not a job for which you are
paid and on which you are judged by your peers
and your boss.
Businesses that provide their customers with a
frictionless experience remove the incentive for
them to try their luck at a marketplace.
You achieve this through integrations, not only
with your own systems but also with the ERP of
your suppliers so workflows can be automated.
The other way to boost customer stickiness is
to over-communicate, not with distracting,
noisy messaging as sometimes happens in
B2C, but with relevant, real-time and actionable
information about order status, updates on
returns, notifications of price and assortment
changes, even information about new people in
the company. Marketplaces will not let you do that
because the marketplace, and not you, controls
the flow of information.
A brand or wholesaler knows much more about
its customers than any marketplace; leveraging
these insights to remove pain points in the
purchasing journey, and to really help customers
do their job, is an effective means of boosting
loyalty.
Another is to offer customers an end-to-end
buyer experience for a range of goods, the socalled one-stop-shop. This was the path chosen
by Paardekooper, one of the largest European
distributors of packaging and packaging materials.
Rather than joining or setting up a marketplace,
Paardekooper expanded its assortment to
become a one-stop shop for restaurants, snack
bars and food markets. As well as the paper
coffee cup, it now supplies the milk and sugar to
go into the coffee, the coffee itself, plants and
candles to decorate the restaurants and so on.
You can launch one-stop shops through creative
partnerships. Fruit and vegetable wholesalers
could team up with meat suppliers to offer
restaurants and hotels a one-stop shop. Furniture
suppliers could partner with distributors of paint,
of wallpaper, of accessories such as mirrors and
cushions, making life easier for existing customers
as well as attracting new ones.
For the one-stop shop to be effective,
personalization is crucial. We see a limited
role in B2B for implicit personalization where
algorithms interpret the click path of a web shop
visitor to make predictions about customer likes
and needs. What matters in B2B
The big five eCommerce trends for 2021 8
one-stop shops such as Paardekooper’s is that
the eCommerce system allows businesses to
segment their customers, personalize the content,
the assortment and discounts, so customer
communication is optimally relevant at all times.
ReplaceDirect offers a vast array of components
for laptops, printers, vacuum cleaners, televisions,
camcorders and even drones. The business has
an immense catalog and a very diverse customer
base. Here the personalization happens at the
log-in level where visitors are asked what product
category or sector they are in.
Integrations, relevant communication, creative
collaboration, personalization: these initiatives
make you the go-to site in your industry. By
reducing friction in the purchasing experience,
and by giving customers real-time information
that is useful to them, you neutralize any
temptation to go to a marketplace which knows
next to nothing about them, and cannot offer
them anywhere near the same level of service.
Marketplaces are very much a trend, but not a
trend that you should follow blindly, especially if
you are trying to build your brand.
Another buzzword in eCommerce is ‘headless’.
As in marketplaces, this trend offers huge
opportunities, but not for every business.
Headless eCommerce is the topic of our next
section.
In headless eCommerce, the backend of the
system can develop independently of the
frontend. This means that presentational changes
in design, content and concept can be built
without having to rewrite a single line of code for
the backend of your eCommerce system.
For consumer-facing brands this is a big
advantage, because it makes them much more
agile in how they respond to the market. So,
for larger brands, the headless approach is fast
becoming a competitive necessity.
The concept of headless eCommerce is beautifully
simple, but executing a headless strategy is
complex, time-consuming, expensive - and
probably beyond the resources and capabilities of
most mid-market IT teams.
This is not to say that mid-market B2B would not
benefit from a headless architecture, only not for
every functionality or application, because a lot of
functionalities are standard for most eCommerce
operations.
The checkout flow of your online shopping basket
is clearly crucial, but does that mean you need to
customize it? What is involved? Customers have
to register who they are and where they want the
goods to be shipped. They need to give an invoice
address and choose a payment method. These
functionalities are now so standardized, why
would you develop a headless implementation
for that? For most eCommerce businesses, this is
unnecessary.
Businesses need to be able to implement a
headless application but only in those cases
where it really solves a problem.
Charlie Temple is an online-only supplier of
spectacles, and a major disruptor of this market.
Spectacles are a consumer product like any other
but for one important aspect: lens prescriptions.
To get round the problem of customers or
opticians uploading these often very detailed
prescriptions, Charlie Temple built a headless
implementation for this specific functionality. This
was possible because its eCommerce system had
a hybrid headless architecture, with a backend
and frontend connected through APIs. The
platform is not truly headless, but comes with a
set of pre-packaged, standard frontends as part
of the implementation. For most mid-market
businesses, that is more than enough but if like
Charlie Temple you need to customize certain
functionalities, hybrid headless allows you to do
that, and without altering the backend.
Hybrid headless is a great way forward for
businesses that do not have the bandwidth
to design and maintain a complete headless
architecture. Such an architecture undoubtedly
confers great advantages, but for the majority of
businesses the sheer hard slog of implementing it
does not outweigh these advantages.
Headless and marketplaces are prominent
trends in eCommerce, but business should
not fall into the error of believing that in order
to stay relevant, they have to join or set up a
marketplace, or they have to run a fully headless
system architecture. No. The key is to be smart
and pragmatic in how you best serve your
customer. This is what will ultimately decide how
successful you are.
The real long-term trend of 2021 and beyond is the future
of wholesalers. In ten years’ time, the business model of the
traditional wholesaler that we see today will have ceased to exist.
Wholesalers will either become brands or retailers, moving
backwards or forwards in the distributional chain.
The corona lockdowns did not create this trend, but certainly
accelerated it.
Covid-19 is a digital moment of truth, with businesses forced
to invest in their eCommerce channels, and to recalibrate their
eCommerce strategies.
The CloudSuite eCommerce solution is well-positioned
technologically to deliver these strategies. We are doing what we
advise all our clients to do: to respond to the specific needs of our
target market and deliver the most optimal and frictionless service
to our customers.
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