Are distributors the future of distribution?
• A new business cycle has emerged due to COVID-19 in which commercial buyers are very similar to consumers.
• Distributors who do not respond to the changing demands of these B2B buyers risk obsolescence.
• There are avenues a business can take to stay relevant, but they involve a radical overhaul of the business model.
The new business cycle that has emerged over the past 18 months is particularly disruptive for the wholesale channel amid changing customer demands and rapid digital acceleration. Businesses that don’t pivot and embrace new realities like digital natives, subscription models, and direct-to-customer sales businesses are on the verge of becoming obsolete. That’s the assessment of Jay McBain, Senior Analyst – Channels, Partnerships and Ecosystems for Forrester Research Inc., at the recent MDM Digital Distributor Summit.
Researching what buyers will look like in a B2B and B2C environment in the years to come, McBain and his team came to a general conclusion: “The prospective business buyer looks a lot like a consumer,” he said. .
The way customers buy and buy B2C items has changed dramatically, especially over the past 18 months. Soon, the B2B sales environment could experience a similar change. “The way you buy a product in a B2B transaction [in the future] will look like how you now buy a car as a consumer, ”McBain said. “So DTC models, based on consumption, are starting to infiltrate the commercial space. Your printer calls home when it is out of toner and orders new toner. Your paper going into the printer is on an Internet of Things ladder; when he gets down to five pounds, he orders new paper. You define it and forget it for life. You’ll never run out of toner, paper or peanut butter again.
And the same could be said for many of the millions of B2B transactions in the $ 13 trillion market. This means that a wholesale change is happening for wholesale distribution.
McBain outlined eight predictions and trends that will influence whether or not distributors are indeed part of the future of their industry.
1. The buyer changes; their psychology, their behavior and their background too
The starting point, McBain says, is understanding how the new B2B buyer looks like the consumer. “For the first time in decades, we are going through a major demographic shift, where the main buyer will be a millennial in four to five years across all industries,” he said. “You have a change in terms of behavior and psychology and the journey itself. You think a lot about those digital and only digital journeys that customers find themselves on, both in consumers and in businesses, to get them to where they want to be.
2. Partner leaders envision a trifurcated canal model
The industry has long focused on a linear supply chain, but a customer’s journey is now supported by different types of channels that no longer have value added by distributors, such as models ‘subscription. The ecosystem surrounding the customer journey is heavenly, and “distributors must step up and become more of a distribution platform serving this trifurous model than simply showing up at the point of transaction.”
3. The multiplier becomes the main differentiation; markets start to tax services
Companies like HubSpot, Salesforce, Google, Microsoft and others are making an exponential impact on the business world with their vast data system, generating multipliers of up to $ 5 or more for every dollar sold. The distributor is excluded from the equation. “This multiplier does not apply today to distribution,” said McBain. “It’s not money flowing through a supply chain, it’s money the customer spends on additional hardware, software and services.”
4. 76% of CEOs think their current business model will be unrecognizable
This multiplier effect changes a lot of things, McBain said, and now “76% of CEOs in all industries are rethinking the way they market themselves.” Manufacturers and distributors are undergoing transformation. Some create websites that look more like a Google or Amazon web services platform than an order taking page, like a typical distributor site.
5. The world is shifting towards subscription and consumption models
Think of everything as a service, McBain advised. “We’re moving to subscription and consumption models for everything. Our toothbrush, our razor, even our professional life. It is starting to have a real effect. If every company becomes a tech company, and if 76% of them think about subscription and consumption models, that is a game-changer.
6. The future integrated / white label replaces the SKU
“When you look at all of these emerging technologies, there’s one thing that jumps out there: None of them is a product,” McBain said. Moving from a product-oriented market to a service-oriented market is an important lesson. Compare Salesforce to IBM, for example. The former has a market capitalization of $ 242 billion while IBM – a company that views technology as a service rather than a product – has a market capitalization of $ 129 billion.
7. Marketplaces accelerate the decline in resales
Markets rose more in a three-month period in 2020 than in the past 10 years combined, McBain said. A third of the US economy goes the market route. “When I said the future buyer looks like a consumer, it’s going to have huge market elements,” he said. “For every business now, it’s a problem that moves from the background to the fore. It diverts the money from the resale. And that threatens distribution.
8. The chain takes advantage of the changing future of work
With so many people not returning to an office, the future of work is changing. “It creates opportunities and permutations that distribution – and every industry – can begin to look to the future of work,” he said. “They can start thinking about the future of buying and start seeing it as an opportunity to, # 1, become a distribution platform, and # 2, come out of hiding. The customer does not buy hidden value. They want to understand the elements of value-added distribution. Instead of hiding behind any agent, dealer, broker, reseller, franchisee, retailer, the future of distribution is about being open and showing that value to the market – and making sure that the customer understands this value and will pay for this value. “
McBain wrote an article earlier this year with the same title as his presentation, “Are Distributors the Future of Distribution? This earned him a few cease and desist letters, he said. In this article, his closing statement sums up the situation that distributors must now embrace.
“The shift from transactional technology sales to nonlinear ecosystems is creating measurable value for the customer, leveraging network effects, incubation and co-innovation,” wrote McBain, who echoed during Summit. “This is a heavenly new approach in which millions of partners, products and customers move across the universe, and smart distributors must be able to predict (and monetize) when the stars will s ‘align.”