In the Grainger results for the 2019 second quarter – Chairman and CEO DG Macpherson said – “We continued to demonstrate our ability to generate profitable growth in the second quarter of 2019. Despite slower than expected global economic growth and our significant investment in the endless assortment model, we drove strong operating results and cash flow”
The endless assortment that DG Macpherson refers to the ‘endless aisle’ strategy.
What is an endless aisle strategy?
Endless aisle refers to the concept of enabling customers in your stores to virtually browse or order a wide range of products that are either out of stock or not sold in-store and have them shipped to the store or their home.
Investing in B2B eCommerce for stronger sales
Grainger has two models ‘High Touch Solution’ model and ‘Endless Assortment Model’.
The High Touch Solution model caters to complex customer needs and the Endless Assortment Model’ caters to simpler customer needs with a broad assortment of B2B products across various categories, with competitive pricing and quicker customer service.
Grainger implements its endless aisle model in zoro and monotaro.
Grainger didn’t break out eCommerce sales, but in recent quarters has noted that eCommerce sales accounted for more than half of total sales.
Alibaba has also stepped up its game in the US. It has opened up its B2B platform for the US sellers. Alibaba will be promoting the marketplace to SMBs on a national tour, with events organized in partnership with local business groups.
In fact, Alibaba says that one-third of Alibaba.com’s buyers are US businesses.
Meanwhile, Amazon launched its B2B marketplace in 2015 and has already entered the B2B market through Amazon Business.
Amazon reported in September 2018 that it had “reached more than $10 billion in annualized sales” and Forrester Research has said those sales could exceed $20 billion as early as this year.
Walmart for Business
Walmart is also showing aspirations to enter the B2B market through Walmart for Business. In its site, it has listed various categories like Office Supplies, Breakroom Supplies, Business Furniture, Business Printing, Electronics, Software & Books, Shipping & Moving, Janitorial & Sanitation, Food Service Equipment and more.
Walmart is signing up industrial manufacturers rather than simply opening its platform to third-party sellers. By carrying these products directly, the company isn’t just serving distributors – it’s competing with them, like Amazon Business.
According to Ian Heller, President & COO, Modern Distribution Management, Walmart will use its enormous capital, massive logistics platform, and much-improved digital talent to pursue B2B distribution with a competitive and distinct marketplace.
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B2B eCommerce – Growing Fast
Sales transactions in the United States processed through B2B eCommerce sites, log-in portals and online marketplaces grew 11% to reach $1.08 trillion, according to data published in the 2019 U.S. B2B eCommerce Market Report.
According to B2BecNews surveys in 2018 of 276 manufacturers, wholesalers and distributors, 60.7% of manufacturers and 38.1% of wholesalers and distributors do not yet have an eCommerce site.
But the vast majority of those without an eCommerce site, or 75%, said they planned to launch one within two years.
Nearly all of the companies included in the S&P 500 stock index now use B2B eCommerce systems.
The technology of the buying and selling process is rapidly evolving in B2B eCommerce. The below image provides an idea of the evolution of the technology platforms in B2B eCommerce.
Why distributors must invest in eCommerce growth for sales?
- Lower administrative costs
- Lower search cost for buyers
- Lower transaction costs by eliminating paperwork and automating parts of the procurement process
- Reducing inventory to the bare minimum
- Increasing opportunities for collaborating with suppliers
- Create greater price transparency
- Increase visibility and real-time information sharing among all participants in the supply chain network
Analysts estimate that the cost of a single manual entry is about $10.50 when handled by a sales rep on the telephone. A digital order cost is estimated to be 25 to 50 cents.
A well-honed B2B eCommerce site will enable distributors to
- respond instantly to market trends
- remove the need for excess stock
- schedule ‘just-in-time’ deliveries
- use quality information to make better decisions
- empower the workforce with tools to make them more productive
Apart from this, they will also have a first-mover advantage. Other B2B eCommerce firms may imitate but firms that do sustained investment in new technologies will be able to adapt faster and create a string of first-mover advantages.
Thousands of smaller firms are also now able to employ B2B eCommerce systems as low-cost cloud computing and Software-as-a-Service (SaaS) versions become widely available. There are thousands of mobile apps available from enterprise B2B vendors such as SAP, IBM, Oracle, and others that link to supply chain management systems.
B2B managers are increasingly using public and private social networks and technologies to enable long term conversations with their customers and suppliers.
Distributors must take the ‘eCommerce’ step now before it becomes too late.
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