B2B customers want to buy online, and they want to have a personalized, digital shopping experience comparable to what B2C buyers enjoy. But distributors need to choose their marketplace partners carefully. Selling on a marketplace discloses a lot of confidential information, such as suppliers, SKU information, customer data and more. Some marketplaces have been accused of exploiting such data to their own advantage; relationships like that often aren’t worth the benefits.
In one Distribution Strategy Group survey, we found that 88% of distributors’ customers reported buying from at least one B2B marketplace, with 33% buying from five or more. In today’s age of ecommerce and digital marketplaces, is there a way to compete with digital giants like Amazon while simultaneously expanding your customer base to markets you can’t reach through traditional methods?
Kevin Weadick has been the President of Zoro since 2017. Before that, he spent most of his career with Zoro’s parent company, Grainger. He is an expert in supply chain management and ecommerce. Zoro is the top marketplace that distributors sell on, according to our research, with Amazon Business coming in at a close second. We talked with Weadick about how Zoro and other third-party marketplaces play a role in distributors’ online success.
Distribution Strategy Group: Will you tell us about yourself and your career?
Kevin Weadick: I went to the University of Wisconsin for undergrad and graduate school. There is a Grainger Center for Supply Chain Management at the university, so I went into that program. Upon completing my MBA, I was fortunate to get an opportunity to join the team at Grainger. I’ve worked in the Grainger family of businesses in the US, Canada, and Europe. I’m now back in the US at Zoro. I’ve gotten to touch a lot of different functional areas, which has been helpful in giving me the context that I needed to lead Zoro.
DSG: When coaching other executives, what is some of the advice you give them about how to achieve the high levels of success you’ve earned in distribution?
Weadick: The first thing is that I focused a lot more on going across the organization than immediately going up. I wanted to collect experiences in different parts of the business. I was interested in the supply chain, so starting there and being in distribution operations, inventory management and other areas helped me gain a lot of context. Being open to moving across the organization and collecting those experiences helped me put pieces of the puzzle together.
DSG: Take us through Zoro and what it does in the market.
Weadick: Our goal is to help small businesses find, buy and get all the things they need to do their job. The three values that we hear a lot from our customers are: “I want a vast assortment, fair pricing and to get my delivery quickly.”
Zoro initially started by merchandising Grainger’s assortment into the market. Then we started expanding that assortment to other categories of products that Grainger doesn’t serve. We started reaching out to Grainger’s supply base – primarily OEMs. But, most OEMs aren’t designed to serve small business needs because they don’t want to ship eaches – they want to ship pallets.
What we’ve done to address those customer needs is build partnerships with other distributors. Essentially, we serve as a way for distributors to reach customers they’re unlikely to engage with since we primarily go to market through digital channels. That allows us to serve customers that are starting their purchasing journey online. Then, we use that assortment to introduce ourselves to customers and later engage with them and help them understand how we can help them find what they need quickly and easily.
We’re different than a marketplace in that you can’t just list on Zoro. Instead, we build a commercial relationship with our partners. We don’t do any physical distribution ourselves, so we rely on those partners to help serve customers. We are customer-facing and rely on our partners to provide supply chain and logistic support.
DSG: How do you see Zoro competing against Amazon Business? How do you differ from Amazon?
Weadick: The area where we can create a lot of opportunities is with our partnership with distributors. We value that partnership. We don’t have any inventory or warehousing, so we’re not looking to compete with them. There’s no competitive risk with Zoro, so we find that our partnerships give us access to products and brands that might not exist on Amazon Business. That helps us create value.
Amazon is also a very large advertising platform. Our focus is on search. If a customer is looking for a specific product or brand, we surface those things to them. We don’t sell advertising on our platform. Instead, we’re trying to be relevant to the customer in terms of surfacing the things they’re looking for so it’s easy for them to find what they need. Then, by leveraging distribution partners who are really good at shipping, we can get products to customers quickly.
DSG: What is Zoro’s pricing strategy?
Weadick: Our intent is never to set the market for a price; it’s to be in the consideration set. A lot of new customer traffic comes from search engines like Google and Bing. If you type a brand or part number into one of those search engines, you’ll get several options that you can buy from. In those situations, the price is pretty transparent, so we have to have a price that allows us to be competitive. But again, we’re not looking to set the market price for the item. Our pricing is comparable to Amazon, but often it’s comparable to other partners selling products online, too.
DSG: You sell directly from manufacturers, as well, which is true with every marketplace. Is there potential conflict when representing manufacturers and their distributors?
Weadick: The overwhelming majority of our transactions are fulfilled directly from our distribution partners versus manufacturers. Manufacturers usually have a strong distribution network and have a lot of partnerships with distributors. So most of our manufacturers take the order and send it to their distributors to fulfill.
DSG: We recently published your numbers from last year. What can you share about the size of the company?
Weadick: Zoro has about 8.5 million items that we merchandise online. When I joined the business in 2017, it was about 1.5 million. We’ve added about 7 million items through our partnerships. We grew from $400 million when I joined to just over $850 million last year, with profitability improving at about 4.5% of sales.
DSG: If a traditional wholesaler-distributor wants to build marketplace capability and recruit sellers to sell on its website, how do you recommend building the organizational structure to support this?
Weadick: If you want to be a pure marketplace, I think you need to consider how you will control who lists on your platform. Do you want it to be open or closed? How are you going to vet the products they list? How will you make sure that you stand behind all the things that those third parties place on your platform?
Also, how are you going to manage all the product information and create a discovery experience on your platform so customers can find what they’re looking for? For example, eBay has multiple listings, while Amazon and Walmart have consolidated listings. Product information challenges are not trivial.
Finally, how are you going to drive traffic to your property? If you want to be a marketplace, what’s your value to customers? How are you going to get customers to your platform? It’s not going to be an easy thing to do – particularly at scale. If you’re going to engage in search engine marketing, how will you handle hundreds of thousands to millions of items and manage the data associated with it?
DSG: Because you rely heavily on your partners, how do you ensure customers are consistently satisfied with their overall experience, from end to end?
Weadick: When we sign our partners, our category management and business development teams help them understand our expectations around the timeliness of shipping and what we want the packing slips to look like in terms of information. We do test orders to make sure everything flows so that they’re passing along the information to us. Yes, they’ve shipped the order; here’s the tracking information associated with it, etc.
Then, we monitor supplier performance and have ongoing dialogues about how things are going, where they are meeting expectations and how we can help them be more successful. A lot of data exchanges between the partner and us, so we try and make sure we do a nice job of helping them onboard to our platform. We make it easy for them to do business with us.
DSG: How does Zoro differentiate from competitors?
Weadick: The No. 1 challenge customers have is finding what they need. A lot of our effort is focused on improving the navigation experience on Zoro. It’s a big challenge. Anyone with a vast assortment has to figure out how to take words that someone has typed into a bar and convert them into something meaningful that helps the customer feel like they’re making progress. Most of our focus in the short term is to improve our ability to help customers navigate to the things they need.
DSG: How can distributors get going with Zoro? Where do they begin?
Weadick: Tracy Buelow leads our business development practice. What you could do is find her on LinkedIn and reach out to her directly so she can help you get in touch with the right partners. We also do a lot of outreach on an ongoing basis, too, where we have a team that reaches out to distributors in different product families.
We need distributors who can give us product information to merchandise effectively and who can ship relatively quickly so we can provide a meaningful experience to the customer. We also need people who can effectively receive transactions through an EDI portal. Our relationships do involve a supplier agreement letter, so there are some commercial terms we want to make sure everyone agrees to.
DSG: Zoro has generated a uniquely powerful loyalty among customers. What do you think accounts for this stickiness compared with competitors?
Weadick: I think what we do well is take a broad assortment of products and introduce that assortment to our customers. Then, we’re good at actually doing what we say we’re going to do from a fulfillment standpoint. I think everybody who is a supply chain professional knows the challenges everyone is facing right now from a service availability standpoint. But, we deliver on our commitments, and if we have a disruption, we make it right for the customer.
We’re not perfect, but we are working hard to address problems and provide great customer service. It’s hard with some marketplaces to call and talk to a live human being If something goes wrong. We try and make that process easy so that when you call, someone answers the phone within a few rings and helps resolve whatever challenge the customer is having.
Watch our interview with Weadick: