Wholesale Business Looking for new Role in Supply ChainFive Ways in Which Wholesalers Are Digitally Enabled Partners in the Value Chain
E-commerce puts pressure on the revenue model of the wholesaler business. Wholesalers remain relevant by digitally excelling and by maximally taking away the worries of the other links in the supply chain.
The wholesale business represents 8 percent of our gross domestic product in the Netherlands. About 79,000 companies and 485,000 employees realize a yearly turnover of 435 billion euros, which can be seen from the figures of ING. However, the playing field is drastically changing. Big web shops seize power and take over more tasks of the traditional wholesale business. Think of Zalando which just started in Germany with the storage and fulfilment for third parties. Furthermore, consumers can order online products abroad more easily, for instance with ‘new’ competitors such as AliExpress. In short, the overpopulation on the market is clearly increasing.
The position of the wholesale companies is more challenging in this playing field. They must be the determining and indispensable factor in the chains. How do you keep or grab the role of chain director as wholesaler? The two most important elements in the strategy must be digitalisation of the products and services portfolio, and a clear positioning on the market, be it as a price leader, service provider, multi specialist or niche player. A focus on sustainability or the offering of own brands can be interesting forms of specialisation. These are coupled with the services for the retailer ‘taking away the worries’, such as prefinancing, warehousing, building a web shop or a website, etc. Predictive analytics are relatively new in this game: wholesalers who convert their data into useful insights for retailers and producers with regard to predicting the purchase behaviour of clients.
The step from orders via telephone and fax to online business is not easy, especially if the relations within the value chain are under pressure. However, the investment in a good B2B e-commerce platform pays off in the form of new business models, new markets and / or new clients. We see five ways in which wholesalers can proactively be different as a partner in the value chains:
- Omni-channel service
The client expects that all channels of the retailer perfectly complement each other. This does not only apply to the orientation and purchase, but also to the collection and possibly return of the order. In order to send orders to the shop so that the client can collect them and hand them in there, the retailer has to set up complicated logistic processes and often has to keep a different warehousing for online clients. Wholesalers can help by taking over the logistics and service and by combining the products with intelligent dispatch possibilities (same-day delivery or delivery within a certain period of time). Another option is drop-shipping or delivering the ordered products directly to the consumer under the brand of the retailer. The wholesaler invoices the retailer, if something is ordered so that the shopkeeper can concentrate on the core products and can offer items from the complete wholesale catalogue without additional risk.
- Direct contact with consumers
Wholesalers can also opt for directly doing business with the consumer, either via special B2C solutions or by working together with external retail market places. This often happens under a new company name, as a pure-play spin-off. An example is the Technische Unie which makes direct contact with the consumer as Thuiscomfort.nl.
- Direct sale to medium-sized enterprises
Wholesalers who exclusively refer to big companies and industrial groups can extend their focus to medium-sized and small businesses. It depends on which products are sold – if complex and expensive distribution products are cancelled in order to fulfil needs of the big clients, it will become difficult to deliver in a cost-efficient manner to smaller companies. However, we can see that technical wholesalers for instance can take this step rather easily. Like this, ERIKS group has set up Zamro, a webshop for tools and technical components for medium-sized entrepreneurs and INDI, an online supplier of technical components, has emanated from the technical wholesale business Kramp. All of these initiatives are starting on an international market and also sell their products outside the borders of the Netherlands.
- Full-service provider for smaller retailers
Wholesalers who are active in several regions can help clients to compete more effectively by providing them with access to share e-commerce platforms. Often these specialised retailers do not have the income for starting own e-commerce solutions. By sharing platforms, they can keep their current customers and attract new customers. This happens often in the book industry, for example, one of the first sectors which had to deal with the disruption of e-commerce. After all, web giants such as Amazon and Bol.com have started as online book sellers. Wholesalers realized that without their support more retailers would disappear, together with a substantial part of their customers. Therefore, they invested in digital provision of services for the retail and supported those book shops in developing their own digital processes and structures. Like this, retailers can offer digital channels to clients and anticipate the changing market demand.
- Full-service provider for manufacturers
In view of the traditionally strong role of wholesalers with regard to manufacturers, the wholesale is ideally positioned for offering full-service e-commerce solutions which manufacturers can use to sell directly to the consumer. The wholesaler bears the responsibility for the execution, in the name of the manufacturer. The advantage for the manufacturer is that he does not have to make any big adjustments in order to introduce the direct-to-consumer model. Supermarkets and online warehouses directly offer a lot of products of manufacturers via the shop-in-shop principle. It is a matter of (short) time until we will see this in abundance in wholesale as well.
The transparency and the ease which the internet has provided both for suppliers of wholesalers and for buyers and end customers, is not only a threat but also a chance. Trade and stock control will always be necessary and wholesalers can offer a lot with their knowledge and their network. If they succeed in combining this information with a pioneering role in one of the ways described above, the digital world will be open for them.
How the Intershop Commerce Suite can help establish the right services can be read here: http://www.intershop.com/intershop-commerce-suite-modules