Delivering for Best-in-Class Wholesaler-Distributors
January 11, 2019  |  ByMark Dancer, NAW Institute for Distribution Excellence Fellow

In my last post, Invent Zero-step Distribution to Save the Value Chain, I argued that distributors must invent “zero-step” distribution to save their value chains. My logic is that out-of-the-box innovations are essential if incumbent value chains are to remain a viable and valued source for customers. This is true, because the business model of many disruptive marketplaces is all about moving traditional business to the virtual world and setting up a competition with traditional value chains. The zero-step distribution concept is one way that distributors can work with suppliers to achieve new scale efficiencies, leverage artificial intelligence capabilities and modernize the value chain.

But more is needed, much more. Distributors must also have a strategy for winning in the virtual world by offering differentiated online customer experiences.

Today’s distributor webstores do not fit the bill. In most ways, they are imitations of the experience available to customers on virtual marketplaces. Distributors have been told that this is the goal through an oft-repeated mantra — customer expectations forged through consumer buying experiences will migrate to preferences for business buying practices. But why is this true? Is it right for all business customer purchase occasions?

It is a fact that some business buying practices are consumer like, including those that value convenience, ease of doing business, easy price checks or finding a quick solution after a cursory review of competitive offerings. But business customers also acquire products through buying processes with other priorities including deep solution or application expertise, customized delivery services, collaboration around new product development and gaining leverage over prices or total cost of ownership. Webstores and online places have a place in today’s markets, but they are not designed to create optimal customer experiences for any of these business needs.

Recognizing this dynamic, many distributors are attempting to compete against disruptive forces by offering a combination of online/real-world customer experiences. Webstores are deployed to intercept shifting business customer preferences for online procurement, while value-added services lock in customer loyalty through innovative and differentiated solutions that disruptors are unwilling or unable to match.

This strategy is fatally flawed because it only fights on one front, the battle for customers in the real world. Putting up a website that is mostly a me-too imitation of an online marketplace is not fighting. It’s conceding. True enough, putting up a webstore is a massive investment for distributors, one that requires a vast capital spend and a transformative retooling of the distributor’s people skills and business processes. But it is not innovation. It does not differentiate distributors. Webstores may be necessary for distributors to survive in the digital age, but they will not be enough to thrive.

Winning in the digital age requires that distributors fight a two-front war. They must fight in the real world and the virtual one. And to win, they must offer differentiated and innovative customer experiences on both fronts.

In my ongoing research for the next Facing the Forces of Change® report, I frequently ask distributor leaders if they have a vision for “next-generation” distributor e-commerce and online customer experiences. Without exception, the answer is “no.” Distributor leaders are so focused on putting up a webstore that they have not looked beyond to consider what might be next.

One idea is emerging by considering a retail e-commerce concept known as digitally native virtual brands (DNVB). As an online retail format, DNVB offers a customer experience that is all about building a deep relationship with customers around the company’s brand and the user’s passion for its products. Examples include Warby Parker for eyewear, Stitch Fix for clothing and Dollar Shave Club for grooming.

DNVB websites are less about shopping to find a solution and more about reinforcing customer loyalty and a mutually sustained commitment. They do not present competitive offerings in a buy box designed to facilitate decisions around brand and price comparisons. Instead, DNVBs provide images, text and interactive tools that reinforce the customer’s passions and in-use experiences. They build loyalty by proving the commitment and worth of the supplier on the customer’s terms by reflecting the customer’s own story. They build a sense of community and common culture. By doing so, DNVBs offer innovative and differentiated solutions to virtual marketplaces.

For distributors, DNVB platforms are not a best practice to be copied, but may be a foundation for developing a new business-to-business e-commerce customer experience. In workshops and innovation focus groups, distributors have started to adopt the DNVB concept around priority users that include welders, construction workers, facilities managers, engineers and more. One distributor imagined a distributor DNVB model designed to build relationships with professional procurement managers.

There may be other next-generation e-commerce concepts for distributors, but considering how a DNVB customer experience might be right for a distributor’s customers is an excellent start. It opens a new battle on the digital front. By adapting the DNVB concept for distribution, leaders will demonstrate they have a vision that goes beyond imitating to innovating, building confidence and proving they are not just followers, but a force for change working to offer a continual stream of innovative and differentiated customer experiences.

The DNVB concept for distribution is one of 25 innovation ideas that we have collected through our ongoing research for the next Facing the Forces of Change® wholesaler-distributor trends study. All 25 innovation ideas can be found in the recently released new challenge paper, Creating Innovations and Shaping the Future of Business: A Look at Commerce, Technology and Human Forces in Distribution, which I hope you will read. Every idea is identified through brainstorming with distributor leaders, and by bringing new ideas to bear from outside the distribution industry. All of our innovation ideas are a work in progress. We need your help. If you have comments on this post, or if you have relevant examples or expertise to share, please reach out to me at mark.dancer@network4channelinnovation.com.

And, if you’d like to receive updates related to the next Facing the Forces of Change® study, complete and submit this form and we’ll keep you in the loop.

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Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer founded the Network for Channel Innovation to drive awareness, advocacy and excellence for channel innovation, and to enable an exchange of ideas between channel leaders on business transformation, technology adoption, social impact and community engagement. For more than 30 years, Mark has worked with leading companies to achieve channel excellence across a wide range of industries in developed and emerging markets.

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