Quick Take: Making connections

B2B leaders shouldn’t copy retail, but they shouldn’t ignore it either; where can we find common ground in digitally transforming markets?

Retail tells the tale

Steve Dennis is a retail strategist, innovation consultant, and best-selling author. I pay attention to his ideas, but not because they translate to B2B innovation and the future of distribution. Dennis’ retail observations help me notice what’s happening in distribution. His new article, “What We Often Get Wrong About E-Commerce—And Why It Matters,” delivers. I share some of his findings below and offer ideas for discussion. But first, let’s remember how B2B is different from B2C.

In retail, the battle lines are e-commerce vs. stores, and winning has a lot to do with shopping and fulfillment. In B2B, the battle lines are platform vs. distributor, and winning has to do with solving problems. Yes, business customers sometimes exhibit consumer-like behavior, and when they do, buyers favor sources that offer convenience. Convenience buys might be one-off, but they are not stand alone, and the distinction is essential. For every convenience buy, business customers also buy to replace, replenish, upgrade, fix, win a bid, drive efficiencies, get past an emergency, and more. For the uninitiated, business buying behavior is not always rational. Business buyers don’t have personas. They have multiple personality disorders.

In his new article, Dennis first explores the history and evolution of retail e-commerce, then gets down to what lies ahead. A few passages sparked ideas for distribution, and my takes follow his.

Now we find ourselves in the hybrid wave, where e-commerce and physical retail are much more intrinsically linked … While we were always headed to a more blended world, the pandemic accelerated the journey.

In retail, digital natives are launching stores to sustain growth and compete with traditional retailers (who also do e-commerce). As reported by McKinsey & Company here, Amazon Business is building “go-to-market sales forces and offering products they used to avoid due to technical or supply chain challenges.” Modern salespeople are not order takers, and they sell on value, meaning salespeople create value by aligning all that a B2B company can do to help customers solve problems and pursue opportunities. By adding salespeople, Amazon Business is acknowledging that its platform can only go so far. To gain share, Amazon must solve a growing array of problems, and like all B2B companies, salespeople are the tip of the spear for creating value.

It turns out that stores are often better at acquiring customers and stimulating repeat purchases than having to pay Facebook, Google, and the other “performance marketing” toll-booth operators for the same activation. It turns out that it is way cheaper for customers to come pick-up products at your store than for retailers to have to pay someone to deliver it. It turns out that trying to build out an entirely new fulfillment infrastructure to compete with Amazon on same or next-day delivery is a race to the bottom where you are doomed to finish no better than second.

There is a lot to unpack in this paragraph. The second half is about a logistics model that goes beyond massive warehouses to include a system that provides for inventory forward-deployed at store locations. This is likely possible in B2B as well. Plus, business customers demand resilience of the supply chain. Differentiated B2B logistics capabilities will go beyond the physical distribution of landed products on their way to a customer’s location. Winning models will offer collaboration, integration, and optimization. Logistics will enable a cost structure that delivers a competitive or fair price for some purchase occasions. Amazon’s logistical scale may be hard to match, but traditional distributor practitioners have a trump card. Oriented to solve customer problems, incumbent distributors will offer innovations that provide transparency, customization, cost reductions, and profit-enabling services. Is this what Amazon’s salespeople are offering? Time will tell.

The first half of Dennis’ paragraph raises more questions than answers. Amazon Business is definitely in the mode of acquiring new customers by switching their purchases to Amazon’s platform. Are distributors doing the same? This is not a trivial question. When researching customer buying habits and distributor business intentions as a channel strategy consultant, I usually found that distributor sales to new customers from existing branches were tiny, typically five percent per year or less. Instead, distributors acquired new customers by buying other distributors and adding the acquired distributor’s customers to their own.

Are distributors stepping up to battle Amazon Business head-to-head for customer acquisitions? I don’t know. I have seen nothing to say that distributors have abandoned acquisitive growth as the primary method for achieving scale. I have argued that distributors may repurpose physical stores to expand customer experiences to include real-world innovations. Are physical stores a new and powerful tool for organic growth by distributors? Do salespeople deliver better results? Is there a virtual/physical model for acquiring customers? I’m looking for answers.

Your take?

Please read Dennis’ entire article and share your takeaways. I am interested to hear your thoughts. B2B practitioners must not copy retail, but we shouldn’t ignore retail either. Please share your comments below or reach me at mark.dancer@n4bi.com.