Industrial manufacturers may be late to e-commerce, but many seem ready to finally wade—or even dive—in. Clearly, the COVID-19 crisis has acted as a catalyst for industrials to shift to online sales and marketing platforms and generate a greater and more meaningful percentage of “no-touch” sales with both the B2B and B2C customer segments. Digital marketing and sales will likely become increasingly important as remote working persists among B2B buyers and sellers.
E-commerce for industrial enterprises is poised to achieve much more than simply accommodating a world of social distancing by enabling workplace safety. Indeed, some industrials now have in place plans to go from virtually zero online sales to 60% of all sales over the next several years, based on PwC discussions with a number of companies. Indeed, e-commerce is on the radar for most industrials. Some are already growing their e-commerce businesses—directly selling to customers (B2C) a diverse range of products traditionally sold in-store by retailers, such as building materials and tires. This marks a radical pivot from the traditional B2B or B2B2C models.
Most manufacturers have e-commerce plans afoot as well. Two-thirds of US manufacturers (66%) agree that implementing digital marketing and sales over the next two years is a “high” or “very high” priority, according to a PwC survey. E-commerce channels could change business and operating models to open up a host of benefits, including preserving and protecting sales in the event of another pandemic-like crisis, increasing reach into new customer segments (and data about their habits and needs) and improving revenues and lowering cost-to-serve by decreasing in-person marketing and selling. They could also yield increased margins by selling more higher-margin products and services online. Achieving that won’t be easy though, and 40% of respondents agreed that carrying out e-commerce efforts will be a top business challenge over the next two years. Changing existing channels, for example, could introduce risks, so companies need to navigate carefully and mindfully.
When we break down global respondents by type of their dominant sales channel (B2B or B2C), we see that industrials with predominantly B2C sales place a higher priority on digital sales and marketing than companies with predominantly B2B sales.
The onset of the pandemic accelerated workforce and behavioral trends already underway for years, and that makes a strong case for industrials to embrace e-commerce. Just consider that 65% of B2B buyers prefer to research products online and 86% prefer to reorder online instead of speaking to a sales representative.
Achieving e-commerce ambitions and goals, however, requires fundamental changes in the operating and business models for manufacturers as well as their distributors. Industrial companies should get up to speed on numerous other fronts to support successful e-commerce platforms, including altogether new approaches to product assortment and packaging, digital marketing, merchandising and customer service.
Unlike traditional online retailers, most manufacturers will likely sell through a mix of purchasing models including pure direct online sales (research and buy online) and Ro/Po (research online, purchase offline). Both models require manufacturers (and their distributors and other channels) to create an online platform rich with product data, easy purchasing functions and full customer support (either through a call center or through bots) in order to mimic the industry-leading e-commerce offerings customers now experience with other sectors such as consumer products and financial services.
US manufacturers are well aware of the challenges of shifting to digital marketing and sales. One such challenge is deciding, for example, which simple products, such as replacement parts, would be candidates for e-commerce, and which complex parts—such as an engineered power generation system—would likely require old-school, in-person sales (and after-sales maintenance) attention, at least in part.
For many industrial companies, this will be new territory and could be a highly complex undertaking. As a start, companies should examine their product portfolios in an entirely different way. They’ll likely need to segment SKUs according to whether they need to be low/no-touch or high-touch. In other words, which products—and even services such as replenishing orders or MRO—could reasonably and easily be sold online with a low human touch? Which ones require more involved consultation between buyer and seller? Part of this stocktaking will depend on the complexity of any given product, along with considerations of what sort of information and experience the industrial company is able to offer. These initial assessments will determine how traditional marketing and sales may change, and how large a role a new, online marketing and sales and distribution channel will play in the organization. And, on a fundamental level, should a company create its own e-commerce platform or work with a third party? Again, this naturally differs from business to business.
After the initial assessment of what can be sold online, companies will likely need to build into an e-commerce platform a suite of functionalities customers have come to expect. Increasingly, B2B customers expect a fast, personalized, 24/7 digital experience, much like what they expect from the major online retailers. Naturally, this means going well beyond online catalogs and pricing. These customer experiences should include configuration choices and visualization, customer-specific pricing and products, inventory availability, targeted promotions and marketing, order history, product tracking, online product support and after-sales support.
As businesses shift to a greater number of online products and a higher percentage of total sales generated by e-commerce, they can benefit in a number of ways, including:
Before manufacturers dive into e-commerce, they should already be considering how to get the most out of it. Additionally, they ought to consider offering richer content (e.g., describing product use cases and specifications by industry). Industrials will likely need to go well beyond simply digitalizing the product catalog. They need to consider applying other media such as augmented or virtual reality, videos and bots to enhance the customer experience.
B2B and B2C e-commerce will likely force industrials to think through a number of business model issues. One of the most significant consequences of developing an e-commerce platform is its impact on existing distribution channels and networks, which will likely need to be reconfigured. That could mean conflicts with distributors that don’t align well or accommodate a new hybrid of online and offline e-commerce. Some distributors—in a bid to prevent becoming irrelevant—have in turn upped their digital efforts in ways that align well with both manufacturers and end-users. Naturally, such conflicts need to be managed.
Decisions, therefore, should be made surrounding shifting channel dynamics. Which distributors are winners and therefore merit continued partnership, and which ones don’t? Companies may need to work closely with distributors and suppliers to make sure they can accommodate new requirements. It could also mean dealers and retailers need to change (e.g., store products, deliver locally and replenish supplies). How will relationships with retailers shift? What other third-party B2B marketplaces offer attractive selling economics and how can they be leveraged?
As discussed, digital sales and marketing could change manufacturing businesses deeply and pervasively. It could yield new business models and affect relationships with suppliers and, most importantly, new and existing customers.
Businesses should appreciate that they are on the cusp of momentous transformation with much at stake, and that devoting planning and resources at the beginning will help prevent potentially costly shortcomings or disappointments down the road.
Despite the challenges involved, there are clearly incentives for companies to pursue evolving digital sales and marketing. When done correctly, building out both digital B2B and B2C channels is likely to open up new opportunities, including lowering the cost-to-serve, increasing value for customers, gaining a competitive advantage, expanding a customer base and increasing loyalty among existing customers.
Clearly, getting e-commerce right for industrials will take time. And, remember, not everything can be done at once. We see successful e-commerce programs carried out in incremental steps, with each adding incremental possibilities of value captured by both B2B and B2C initiatives.
Journeying along an e-commerce “roadmap” requires numerous capabilities. The most fundamental one is understanding the customer journey to enhance the customer experience. This means successfully marketing across all customer segments. It also means confirming that your employees and distributors are prepared to meet customer needs and preferences. Other key milestones customers have come to expect include providing robust online data, content and pricing regarding products and services, integrating the right technology to facilitate the sales and marketing and ensuring that supply chains and logistics are closely aligned to the new ways of e-commerce selling and after-sales service.
Global Industrial Manufacturing and Auto Industry Lead, PwC US
Industrial Manufacturing Leader, PwC US
US Salesforce Partner, PwC US