Many distributors have become so discouraged about how their websites are performing that they are investing less in overall digital capabilities. After all, why throw good money after bad if you believe you’ve failed so far?
The problem is that your customers do have requirements that you need to meet with digital capabilities. And if you simply stop investing, you are falling farther behind strong online competitors.
We call this the Digital Doom Loop:
- Build a website primarily designed to drive shopping-cart sales
- Measure the website’s ROI by dividing shopping-cart gross margin dollars into costs
- Conclude the website is not meeting its financial goals
- Reduce future expenditures on digital capabilities
- Fall farther behind in meeting customers’ digital needs
How to Escape the Digital Doom Loop
Option 1: Dominate with Value-Added Capabilities and Services
Distributors seeking to create digital success with online capabilities and services need to start by acknowledging that driving shopping-cart sales should not be the primary mission of the company’s website.
Your Digital Mission
Build capabilities that drive customers to engage digitally as frequently as possible because:
- Customers get more value from your digital tools than from competitors’
- Customers prefer using your digital tools because they are fast and intuitive
- Your digital tools make customers’ jobs easier
It is not possible to provide an exhaustive list of digital capabilities business customers value. Also, every distributor should conduct its own customer research to develop and prioritize its capabilities. However, common digital capabilities include:
- Customer portal to allow customers to manage their accounts
- Product training
- Upload technical drawings for quotes/prototyping
- Schedule a service (i.e., safety audit)
- RFQ Form or Cart
- Rent equipment
- Schedule a repair
- Return a product
- Managing bin or vending replenishment
- Access technical support
- Track my delivery
- Contact my sales rep
- Chat with customer service
- Schedule or change a delivery
- Look up repair parts
- Trigger a blanket PO release
None of the capabilities on this list drives revenue through the shopping cart, but all of them add value for customers and will grow overall sales over time. Your website may not be driving sales directly through your shopping cart, but it is playing a vital role in creating sales through other channels.
“Sales Created” is Like “Points Created”
Distribution Strategy Group Principal Jonathan Bein illustrates this principle by comparing two famous point guards in the NBA. Steph Curry is noted for his shooting accuracy and ability to score a lot. Chris Paul scores a lot too but is more famous for his assists.
Because assists are so important in basketball, there’s a term for points scored + assists: “points created.” The lifetime statistics of these two players (through 2020), show that Steph Curry scores 33% more points per game than Chris Paul, who gets about the same percentage more in assists.
If you give Chris Paul two points/assist, you’ll find these two superstars are almost tied for “points created”:
Similarly, we believe that:
Your website’s assistance in driving sales through other channels is just as important as your cart sales.
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Consider the following benefits when calculating ROI:
There are various methods to measure the items in the numerator. For example, consider the second item, “Orders generated by the website but placed via other channels.” Of course, there are many ways to estimate your website’s contribution to sales, such as evaluating web search data and correlating it to transaction data from your ERP. But we suggest a simpler method:
Every month, give an intern or a customer service rep a hundred orders that were placed through non-web channels. Call those customers as though you’re simply doing a customer service check to ensure they received good service.
On the call:
Thank the customer for the order and clarify that this is a “service check” and not a sales call.
Ask the customer if they used your website in the process of putting together the order.
If the answer is “no,” the call is done, and you thank the customer again and ask if there’s anything you can do for them.
If the answer is, “yes,” ask the customer:
- “How did you use our website? What did you look at; what information did you get?”
- “What information did you look for but couldn’t find?”
- “Of the business websites you visit regularly, which ones do you like the most and why?”
- “What else could we offer you online that would make your job easier?”
This type of call provides many benefits, of course – you get valuable feedback on how well you’re serving customers. It also provides you with ideas about what you should offer on your website in the future and helps you identify competitors’ websites you should evaluate.
Most importantly, it allows you to estimate your website ROI. You might, for example, decide that when a customer reports that they used your website to help assemble the order, you’ll allocate 50% of the gross margin dollars to your “numerator.”
This is obviously an imprecise measurement – but it’s much more precise than allocating zero benefit to your website given that customers are using it as a shopping tool when they do business with you.
This feedback will help you formulate your digital strategy.￼
We believe most distributors can come up with an approach that works for them – certainly one that works much better than limiting the benefit to shopping-cart sales.
And there is a caveat to this advice:
Every distributor that has any non-complex transactions must make them easy for customers to buy. Even if it’s a small percentage of your business, these are likely high-margin, low cost-to-serve revenue and you must offer a competitive experience for customers who want to buy from you in these situations. Current technologies and widely available expertise make this relatively easy.
Option 2: Differentiate Online
￼We have visited hundreds of distributor websites. Occasionally, we come across one that is clearly successful at driving online sales and, without exception, these websites have fantastic product data and other technical tools that help customers quickly select the right products.
Successful distributor websites tend to be focused on a specialty – a niche – which makes sense: Marketplaces may be millions of SKUs wide, but their product data is an inch thick. Distributors that succeed online tend to go the other way – they specialize in a category of products. Within that category, they seem to carry everything, but their total SKU count is quite small compared with a marketplace. However, their selection tools, configurators, available technical information, and other resources give customers a superior shopping experience vs. a broadline marketplace.
One good example is Nelson-Jameson in Marshfield, WI (www.nelsonjameson.com). Nelson-Jameson provides products and services for food-processing industries. If you look at their product selection, you’ll see that they focus on products that support “sanitary” food processing, such as:
- Sanitary Pipes, Valves & Fittings
- Sanitary Filter Strainers
- Lab equipment
- Bulk Packaging – Food Grade
- Plant Sanitation
There’s an entirely separate section titled “Our Specialties” that lists “Industry Solutions” like “Metal Detectable Products” and “Delvotest Antibiotic Residue Tests.” Nelson-Jameson’s customers need sanitary products and ways to ensure that metal particles and antibiotic residue don’t find their way into the food products they manufacture.
Our reaction – and likely yours – is that these sound like highly specialized items and we don’t want them coming from an ordinary warehouse. And indeed, Nelson-Jameson explain that it maintains SQF Certification, which requires it to meet high standards for food storage and distribution.
Clearly, Nelson-Jameson, which specializes in selling online, has mastered a niche that no marketplace is likely to pursue – ever. If your distribution company can find such an opportunity, then you can differentiate from marketplaces and broadline digital distributors.