Amazon. eBay. Overstock. What do these companies have in common? They’re all driving forces in the growth of e-commerce and, ultimately, the B2B/B2C convergence. As the market shifts, the wholesale distribution industry is feeling the brunt of the changes.
But how does an industry with well-defined, decades-old business models respond? The answer may lie within the heart of the business—partner and customer loyalty.
Impacts of Convergence
According to a recent survey from Aberdeen Group, 80% of wholesale distributors are concerned about the impact to costs and profitability with the increase of B2C orders. Additional impacts of the B2B and B2C convergence include:
- Increases in order density
- Shifting labor and shipping costs
- Condensed order-to-delivery cycle caused by a demand for same-day and two-day delivery
Due to these impacts in business, 87% of survey respondents said they “are facing more challenging and complex fulfillment processes.” As a result, distributors are seeing a need to manage multiple channels for sales and logistics in addition to providing value-added services demanded by customers—all while attempting to uphold their customers’ original cost profiles.
Distributors have been fighting to keep their market share in this changing industry by attempting to alter their typical processes and duties to match demand, but many are seeing their margins shrink and their costs increase.
Leveraging Loyalty
So, as a distributor, how do you effectively manage these challenges without sacrificing your bottom line? Wholesale distribution has always been a business of relationships, logistics and the value they create for supplier partners and customers. And that very nature of the industry could be your saving grace.
A sophisticated loyalty program can provide quantifiable value to customers in innovative ways that may trump external factors in the industry. Evaluate what motivates customers to choose you over going directly to the manufacturer. Then, build a robust loyalty program around it.
Already have a loyalty program in place? Great. That’s half the battle. Now look at how effective it is. What the customer values is constantly changing, so it’s crucial that your loyalty program is in step with the latest data.
Keys to Success
Use these guidelines from Aberdeen Group to ensure you’re creating a loyalty program that will be a true catalyst for success:
- Document and summarize all performance and/or incentives currently offered to customers and manufacturers/suppliers as a starting point for the loyalty program
- Establish a baseline for cost-to-serve information at the item, customer and channel level, based on existing capabilities
- Segment the business by channels, customers and products to determine profitability
- Determine which channel and customer segments are strategic to the business, as well as manufacturers/suppliers, where applicable
- Establish a formal loyalty program solution that tracks, monitors and provides analytics for all of the segments identified at the item, customer and channel level
- Change the mindset from “business as usual” to “profitable business,” recognizing that the business cannot be all things to all customers. Leverage the loyalty program to define and implement policy. Using analytics, seek out previously unidentified opportunities.
- Close the gap on missing/inaccurate cost-to-serve data in order to provide a more accurate picture of true profitability by item, customer and channel level
- Based on a formal review of what’s in place, reevaluate and revise the rewards program for consistency across all strategic elements as the new baseline
- Leverage the loyalty program as a catalyst to hold reviews with customers and manufacturers to identify what’s working and areas where help is needed
- Based on the reviews and defined strategy, offer services on delivery guarantees in targeted omni-channel points and restrict areas that are not in line with the business strategy
- Seek alternatives that combine efforts to address particular decisions with innovative solutions, possibly involving the customer and manufacturer/supplier jointly
A loyalty program supported by knowledge and experience is the key to providing an increased value for your channel partners—and better results for you.