Diversified Foodservice Supply, a distributor of maintenance repair and operation (MRO) items, equipment, and supplies to the food service industry, has a value of $300 million. With over 100,000 products available, the company caters to independent restaurants, national chains, industrial kitchens, and resellers throughout the United States.
Diversified offers spend management tools via its website, enabling its customers to efficiently manage their expenditures with the company and their overall budgets. One feature on Diversified’s website permits an administrative user of a customer’s account to establish a monthly cap on the number of orders that can be placed. By enabling customers to assemble and manage orders sent by a master procurement department to specific restaurant locations (that typically have limited storage capacity), Diversified's website feature reduces shipping expenses. It streamlines the receiving process by "bulking up" orders before shipping rather than sending several small shipments. Additionally, the tool guarantees that orders are placed when required only, aiding customers in optimizing their inventory levels.
This website feature and other similar tools have resulted in significant business outcomes. Today, eCommerce accounts for over 34 percent of Diversified's total revenue, and the company's share of wallet has increased for clients utilizing eCommerce.
As per Bailey, customers who use eCommerce are now placing orders with higher average values, indicating that they are capturing a more substantial portion of their spending. This is primarily due to the company's efforts to simplify their customers' ordering and expenditure management process.
The company is exploring the potential of B2B eCommerce to provide enhanced distributed purchasing capabilities via its website, enabling procurement teams at large chain restaurants to empower local restaurant managers to make purchases. This will further simplify the buyer's workload, which the company anticipates will have additional positive revenue and profit outcomes.
eCommerce can act as a force multiplier for the sales team, enabling them to build a share of the wallet. Although sales teams may strive to follow up on every lead, the reality is that they cannot devote their time and attention to every single customer, especially those with smaller accounts. To maximize their impact, sales teams often prioritize larger accounts that generate higher business volumes.
What about the needs of smaller customers? Should they be ignored? Absolutely not. A B2B eCommerce platform is well-suited for serving the needs of smaller customers. The self-service features of the web are perfect for accommodating and supporting these customers. By creating a well-designed eCommerce website, sellers can increase their share of wallet from existing small customers and even acquire new customers who may not have been served adequately without eCommerce.
For example, one of the clients, a well-established tool producer with a market value of $300 million, possesses multiple brands of tool and landscaping equipment distributed globally. The company markets its products to large retail stores such as Lowes and Home Depot and smaller hardware stores run by independent owners. Though these smaller, independent retailers may be decreasing in number, thousands of such specialty retailers still exist across the United States. The company derives roughly 35 percent of its revenue from these smaller stores.
Neglecting this base of customers could harm the company's growth. By offering an eCommerce channel to these retailers, the company can capture sales that would be difficult to secure through a salesperson alone. eCommerce is crucial for maintaining wallet share with these smaller customers.
By launching an eCommerce website, a business can introduce its products and services to new potential customers, thanks to the expansive reach of the internet. This can result in the discovery of customer segments and markets that were previously unimagined, leading to the emergence of new revenue streams. Once a company identifies these new customer groups, it can leverage eCommerce tools to create targeted marketing campaigns to grow revenue streams from these segments.
Mountz, a San Jose-based company, is a prime example of excellence. With over 50 years of experience, the company specializes in manufacturing and distributing torque tool solutions and metric fasteners for various industries, including aerospace, automotive, electronics, energy, medical, and packaging. Mountz's products, which consist of analyzers, wrenches, screwdrivers, and other precision tools, offer unparalleled precision and performance, making them essential for high-intensity applications. Leading companies like Boeing, Amazon Robotics, Cisco, and Intuitive Surgical, rely on Mountz's products in their manufacturing processes. This is especially crucial in applications such as commercial aircraft, where even a tiny discrepancy in screw tension can lead to significant and even catastrophic consequences.
Mountz experienced an unexpected outcome when it began allowing customers to purchase their products directly from their website. The site began receiving traffic and orders from bicycle enthusiasts and bike shops. These customers discovered Mountz's website through Google searches and were drawn to the precision and accuracy of their tools, which were also necessary for tuning bicycles. Mountz's metric-based tooling is difficult to find, but their website was easily discoverable through Google searches due to their authority in this product category. Once the website went live, these customers could easily locate and buy Mountz's products.
Having identified this new customer segment, Mountz is now targeting them directly through various digital tools they may not have previously utilized. These tools include search engine marketing, email marketing, social media advertising, marketing automation software, and a product information management (PIM) system to manage all product data. Additionally, Mountz is using information syndication systems for platforms such as Amazon to broaden their reach.
Moreover, this new customer segment has generated a substantial amount of additional revenue for Mountz. It is possible that their sales team was not aware of this development, as they were previously focused on serving large enterprise customers such as Boeing. eCommerce can create opportunities for companies like Mountz to access new markets and increase sales across multiple industry sectors.
The third driver of ROI can have the most significant impact on transforming an organization into a digital-first operation. However, it also causes the most anxiety, particularly among sales teams and customer support personnel. Although there may be a perceived "competition" with traditional selling channels, the reality is that this is not usually the case.
Although humans may perform some functions today, some can be substituted or improved through eCommerce implementation. This enables organizations to redirect their resources towards more strategic purposes. When examining a company's operations, we often encounter repetitive tasks and functions that can be automated or self-service for customers, freeing up human capital that can be invested in more productive activities.
B2B businesses often receive routine orders known as "bread and butter" orders, which usually do not require a lot of consultation. These orders typically include re-orders or orders for commodity products, such as replacement parts for equipment or consumables used by capital equipment like printer ink. Is it genuinely productive for a salesperson to interact with a client who only purchases $50 worth of product per month, the same product they order every month with minor differences? It isn't very certain. Nonetheless, numerous B2B companies anticipate their sales teams, including their top salespeople, to handle small orders over the phone or email. Many B2B firms have a long history of relying on personal relationships as the key factor in their business. In the digital era, however, it's necessary to consider whether this level of personalized service is genuinely necessary or can be replicated and improved online.
Requiring salespeople or other personnel to manually handle repeat orders through paper forms, email, or fax is an unproductive and inefficient use of company resources. Instead, consider the potential benefits of using eCommerce to streamline the ordering process and redirect human capital towards more strategic tasks. For instance, with orders automatically processed through the web, salespeople could focus on tasks like re-engaging dormant accounts or pursuing new, high-value clients. By capturing these efficiencies, repurposing experienced personnel, and driving tangible savings, implementing eCommerce can significantly contribute to a positive ROI for the organization.
Similarly, an eCommerce system can significantly decrease the call volume directed to customer support. In addition to enabling customers to make purchases online, eCommerce systems also offer them the option to carry out simple tasks such as changing their address, checking the order status, reprinting invoices, researching their order history, and other functions that can be handled via customer self-service on the website. For instance, a large customer was able to move almost 40 percent of their full-time call center staff from these labour-intensive activities to more valuable outbound calling operations within three years of launching their eCommerce system. This repurposed group proactively engages with the company's customers to present new products and services and ensure their satisfaction.
The benefits of eCommerce extend beyond improving operations. In fact, customers often experience an increase in gross margin when they make transactions via eCommerce. The reason for this is simple: the convenience and time savings of ordering online outweigh the importance of getting the best price. The key to succeeding in B2B eCommerce is to make the buyer's job easier. When you accomplish this, you can charge a higher price for your products online than the customer would pay through other channels. By eliminating the need for customers to contact a salesperson, you also eliminate the need for sales team members to provide obligatory discounts, which may seem counterintuitive but is common.
For manufacturer or brand owners, studies by Forrester Research and others have revealed that more than 40 percent of B2B buyers prefer buying directly from manufacturers and are willing to pay a premium of up to 20 percent to do so. While it may seem crazy, this has been demonstrated repeatedly. This trend is because manufacturers are the owners of the product or brand and are considered the authorities on their products, which creates a halo of trust that allows them to charge higher prices. Customers often recognize their expertise and trust their brand more than they trust third-party resellers, resulting in a higher potential for gross margins.
Kelly/Spicers Paper is a sector of a large commercial paper manufacturer and distributor in the United States, whose clientele comprises prominent newspapers such as the Los Angeles Times and commercial printers catering to big advertisers in the U.S. western region. Promptness in product availability and delivery is crucial in the commercial paper industry to satisfy customer production demands. While pricing is a significant factor, Kelly realized that facilitating swift and effortless order placement was key to meeting their customers' requirements. To leverage this advantage, the company launched an eCommerce platform to simplify the buying process for its clients. Surprisingly, they found that they could charge a premium on online orders, even for routine replenishment orders.
Customers typically know precisely what they want and therefore search for product availability and delivery details, check the price to ensure that it aligns with their budget, and finalize the order, all within a span of fewer than five minutes. This implies that Kelly's buyers are more concerned with the fastest deal with accuracy in delivery and stock levels rather than searching for the best deal. The efficiency of an order takes precedence over its price, and customers do not require a discount to place an order. Consequently, the gross margins on online transactions are higher by three percent compared to offline orders. Considering that eCommerce accounts for half of the firm's total revenue, this increase in the margin of three percent translates to several million dollars in added operating profit.
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