May 21, 2018
There is no doubt that the B2C retail world has been strongly impacted by the emergence of strong e-commerce players. Consumers shifting buying patterns and preferences have led to numerous retail bankruptcies in 2017 and this trend is likely to continue in the next few years. Disruption in retail is a reality. But does it have to be a fatality?
The president of the National Retail Federation, Matthew Shay cites studies that predict the ratio of store opening versus store closing will remain positive, expecting about 5,500 more openings than closings in 2018. The NRF points to many success stories in the world of B2C retail. In the end though, they argue that e-commerce is part of retail and that the question is irrelevant. They do make a good point.
The real question is to whether Amazon, Google, and Alibaba might eventually disrupt the B2B distribution world which is much larger than B2C. If that is the case, will disruption be as strong and as visible as it is in B2C retail? We all know that these companies have their eyes set on the B2B target. If you are in B2B and industrial distribution today, it is time to sit down and face the reality that these e-commerce giants are entering your space. The real question is about what you are doing today to start disrupting yourself before the market does so.
With that context in mind, disruption can be anticipated, prepared for, and leveraged as true opportunity for industrial distributors as well as manufacturers. The sense of urgency should be about taking the right steps today to avoid brutal disruption before it is too late. Changing proactively during successful times is hard to do. But changing before passing the tipping point is a necessity. There are concrete steps distributors and manufacturers can take to prepare for a potential tsunami:
- Revisit your customer segmentation to anticipate switches in customer buying behaviors. We know that B2B buyers are already purchasing using mobile technology and integrated ERP systems. What else is around the corner?
- Test the current state of value propositions and the strength of your business model. Do you still have strong perceived differentiation or can you start to see cracks in your level of attractiveness?
- Conduct an audit of your technology infrastructure and a benchmark of your peers. Are you still doing things manually? Have you embraced must-have technologies such as CRM, dynamic pricing, price optimization, or others?
- Based on steps 1 through 3, design a roadmap for change with required investments in technology, innovation, and partnerships. The battle with e-commerce platforms cannot be won on price only. It has to be won through strategy and innovation with a strong technology agenda.
- Focus on what makes distributors great in the first place: an ability to manage complexity; ability to sell bundles of products and services; connection with end-users and deep intimacy; scale and footprint.
The time to take action is now. There is still time to change and turn the ship in the right direction. Self-disruption, which is controlled and incremental, is better than big bang disruption when it is too late. Some of the largest B2C retail chains have done well against e-commerce platforms. Recent results from Best Buy, Target, REI, Staples, Pet Smart and others show that it can be done. In fact, some of these retailers are forging partnerships with Amazon. Who would have thought? E-commerce disruption is a reality but it is not a fatality. Communicate this point actively with your teams now and get to work!
Editor’s Note: For more ideas on how to prepare for potential disruption, listen to the archivede webinar Amazon at the Gates with Stephan Liozu.