Interview: Digitalization in wholesale
Dr. Kai Hudetz
Since August 2009, Dr. Kai Hudetz is the Managing Director of the IFH Institut für Handelsforschung GmbH (IFH Koeln) in Cologne, Germany.
From its founding in 1999 until 2011 he has been in charge of the E-Commerce-Center (ECC Koeln) which is a business unit of the IFH Koeln. With his many years of experience, Dr. Hudetz is one of the most renowned e-commerce experts in Germany. As an author of studies and numerous specialist articles, he deals with current questions of trade in the digital age.
Q1: Dr. Hudetz, what are your views on digital transformation of the wholesale industry? Is it a risk or an opportunity? Essential or just nice to have?
The second part of your question is easy to answer: It is absolutely essential. As a link between different stages in the value chain, the wholesale industry must seize the opportunities offered by digitalization. Otherwise, it will struggle to survive. The Internet offers many ways for wholesalers to improve and accelerate their service to customers—and thus boost customer loyalty. This is particularly important given the increased competition brought about by digital transformation. New competitors are entering the marketplace and pricing is becoming both more transparent and subject to greater pressure.
Q2: Dr. Hudetz, can you give us an overview of progress toward digital transformation in the wholesale sector? What is the current state of this business-critical customer-facing process?
Having conducted many studies and projects in this segment over the past year, we have a very clear insight into what is happening. As in other industries, however, it’s not really possible to generalize. There are some wholesalers who are embracing digitalization with a strong customer focus, creating web-based offerings and/or apps, for example. The majority of companies, though, are still in the very early stages in terms of coming up with customer-facing online offerings. Having said that, there is a growing awareness that customer-focused digital content is absolutely key to future competitiveness.
Q3: Dr. Hudetz, is digitalization being taken as seriously as it should be in the wholesale industry? Who is actually promoting transformation within the individual companies? Are there signs of resistance to the necessary changes and innovation?
Digitalization is already a priority in many wholesale companies, although the majority still have a lot of work to do. As was the case over ten years ago in the retail sector, there are many wholesalers who still believe that online selling will never be relevant for their industry. They regard their industry, products, services, etc. as unique and not compatible with online commerce. This is a mistake we’ve already seen made by the likes of shoe retailers, opticians, and car dealers. As for who is driving digitalization within wholesale companies, it isn’t just the younger generation—we’re having more and more contact with senior management, too. Middle management, on the other hand, is often determined to stick to the established way of doing things.
Q4: Dr. Hudetz, they say good service is the key to good business—how can wholesalers use e-commerce to develop their business? What positive impact can a platform have in addition to its principal role as a sales channel? Who stands to benefit and how?
That’s a very good question. Unfortunately, many dealers still see the Internet purely as a threat, rather than as a valuable opportunity to offer customers a better quality of service. It is crucial here to consider the issue from the customer’s perspective: What do customers expect? How is their behavior changing? And how can we offer them genuine added value? Online, it is extremely easy to bundle services and work with external partners to offer genuine solutions, rather than just limiting yourself to products.
Q5: Dr. Hudetz, what specific advice do you have for companies? How can they make a complex e-business project manageable? Where do they start and how much planning is required? Who or what should be the focus of their strategy?
The wholesale industry is very diverse, so it’s hard to give a simple answer, but there are four basic principles to consider:
- View things from the customer’s perspective as far as possible. Ask your customers what they want!
- Be informed: there are lots of studies, guides, and events that can help you.
- Think of digitalization not as a finite project, but rather as a continuous process.
- Be innovative: try out new ideas that might surprise your customers.