Manufacturing is ready for e-commerce. Seven things to consider before diving in.

Seven things for manufacturers to consider when building out an e-commerce program

1. What can manufacturers sell online...and what’s sold offline?

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.

 2. Defining products as high- or low-touch can be complex

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.

3. Build the kind of digital experience customers now expect

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:

• Being able to leverage new customer relationships and capture data and intelligence about their needs and preferences. 
• Improving targeted marketing based on this newly collected customer data. 
• Gaining new 360-degree views of not only customers but distributors as well. 
• Adopting the use of artificial intelligence to help anticipate customer preferences and needs.

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.

4. Expect e-commerce to alter channel dynamics in distribution and supply chains

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?

5. Wade—don’t dive—into e-commerce

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. 

6. The near-term challenges are worth long-term benefits

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.

7. Capture value through e-commerce

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.