The State of Distribution E-Commerce 2015

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1 The State of Distribution E-Commerce

2 Summary Real Results Marketing has conducted an annual electronic survey of several hundred participants to better understand trends in e-commerce. Information in this presentation is from two surveys: February 2014 and February 2015 conducted with Modern Distribution Management. Key trends: E-commerce revenue as a percent of overall revenue is rising rapidly Key objectives are acquiring new customers, growing wallet share with existing customers, and improving website usability Grainger is overwhelmingly considered the best website by other distributors Respondents express mixed satisfaction with much of the functionality on their own e-commerce sites Mobile technology for e-commerce is being deployed rapidly. Catalogs are considered to be highly effective for generating e-commerce revenue. 2

3 Best Competitor Website Overwhelmingly, Grainger is named by competitors as having the best website for the fourth year. McMaster-Carr was a distant second. Nobody else was even close....grainger added several hundred people to its e-commerce initiative in 2014

4 Overview Revenue and growth Priorities Capabilities Marketing Data Operations 4

5 REVENUE AND GROWTH 5

6 Stages Nascent less than 5% e-commerce revenue Growth 5% to 10% e-commerce revenue Mature 10% or more e-commerce revenue 6

7 E-Commerce Revenue Increase of nascent and growth stage companies 2014 Increase of mature stage companies Projected 75% increase in growth stage companies 40% increase in mature companies 7

8 PRIORITIES 8

9 E-commerce Priorities Top priorities are Brand New customers Existing customers Ease of use Priorities reflect the nascent and growth stage e-commerce in where the first priority is to get revenue flowing with a usable web site. 9

10 E-commerce Leadership Among respondents with nascent stage e-commerce programs, only half have dedicated leadership vs. 70% who in growth or mature stage. 10

11 CAPABILITIES 11

12 E-Commerce Capabilities Respondents are only satisfied with the table-stakes functionality (contact information and basic search.) For only slightly more complex functionality (stock levels, technical information, social media), there is mixed satisfaction. For advanced capabilities (quote, live chat, and purchase suggestions), satisfaction is low. 12

13 E-Commerce Capabilities Respondents have high satisfaction with login and order placement. They have mixed satisfaction will all of the other capabilities. 13

14 Mobile Capabilities Support for mobile technology has grown nearly 25% from 2013 including: Smart phones Mobi implementations Mobile apps Still, more than 30% intend to implement support for mobile technologies in the next year and beyond. 14

15 Integration Capabilities Smaller distributors are less likely to rely on EDI or punch-out as part of their e-commerce solution. The emphasis on EDI and punch-out has diminished from

16 MARKETING 16

17 Driving E-Commerce Demand Sales rep and CSR s are highly effective at driving demand marketing, catalog, and SEO are most effective and highest spend Paid search has low effectiveness Marketing automation is underutilized in distribution relative to other industries 17

18 E-commerce and Catalog Synergy 85 percent of companies with a successful catalog believe that e- commerce and catalog are synergistic or that their catalog helps drive e-commerce sales. 73 percent of companies who have a mature e-commerce channel believe that e-commerce and catalog are synergistic or that their catalog helps drive e-commerce sales. The three distributors (Grainger, MSC Industrial Supply and McMaster-Carr) who were considered by their peers in a previous survey survey to have the best websites were also considered by their peers to have the best catalogs. 18

19 E-commerce and Catalog Synergy Product information management Brand Sales 19

20 Simple Techniques for Driving E-commerce Demand with Catalog Reference other product options available online - e.g. See our website for 100 s more options Place e-commerce URL on all catalog pages Mention online tools Order tracking Shipping charges Selectively reference videos, training, configuration/sizing tools Promote mobile options, e.g. On the road? use our convenient mobile ordering 20

21 Marketing Automation and Marketing Many distributors use marketing to promote products, special, and branch events. There is limited awareness among distributors about marketing automation and how it differs from marketing. 21

22 Marketing Automation Example No response? Wait 3 Days Clicks Link Newsletter Invite Send Newsletter Opens Invite to Private Demo Send Exclusive Webinar Invite Send Whitepaper Message

23 Service Provider vs. Marketing Automation

24 Marketing Automation ROI Businesses that use marketing automation to nurture prospects experience a 451% increase in qualified leads. In turn, nurtured leads make 47% larger purchases than non-nurtured leads. (The Annuitas Group, Nov 2012) 79% of top-performing companies have been using marketing automation for more than two years, with 79% of CMOs indicating increasing revenue as the most compelling reason for adoption, followed by higher quality leads at 76%. (Gleanster, Aug 2013) 24

25 Marketing Automation ROI Businesses that use marketing automation to nurture prospects experience a 451% increase in qualified leads. In turn, nurtured leads make 47% larger purchases than non-nurtured leads. (The Annuitas Group, Nov 2012) 79% of top-performing companies have been using marketing automation for more than two years, with 79% of CMOs indicating increasing revenue as the most compelling reason for adoption, followed by higher quality leads at 76%. (Gleanster, Aug 2013) 78% of successful marketers cite marketing automation as being most responsible for improving revenue contribution. (The Lenskold and Pedowitz Groups, Nov 2013) Companies that deploy marketing automation see (Aberdeen Group, June 2012) 107% better lead conversion rates 40% greater average deal sizes 20% higher team attainment of quota 17% better forecast accuracy 25

26 Search Marketing Many distributors start with search marketing as the primary or only means to drive traffic and generate demand. Yet, only half of respondents consider search marketing effective for customer acquisition. 26

27 Web Design 25% Select the choice that best describes how your company developed its web design Respondents in a 2013 survey are less likely to do the design all in house or all with a third party than in % 15% Companies with more than $100M revenue are more likely to do the design in house. 10% There is very low satisfaction among distributors regarding their web design. 5% 0% Mostly done with a third party with some in house Even balance between in house and third party help Almost all done in house Mostly done in house with some third party help Almost all done with a third party Not applicable 27

28 Marketing Best Practices Integrated multi-channel and multi-vehicle practices provide the best results for driving e-commerce demand including: Search marketing organic and paid Traditional direct response vehicles catalog and direct mail Marketing automation and marketing and 28

29 DATA 29

30 Product Data 50% Select the choice that best describes how your company gets product data. 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Almost entirely from manufacturers Mostly from the manufacturers with some from third party sources Even blend from manufacturers and from third party sources Mostly from third party sources with some from manufacturers Almost entirely from third party sources Not applicable Other (please specify) Product data accuracy and completeness are good for most distributors. Photographs, substitutes, and information about related products is weak Vast majority of data comes directly from the manufacturer. However, there is an increasing role of pure third party solutions or blended third party solutions.

31 Product Data Best Practices Analyze quality, time, and cost of in-house and third party solutions. Normalize data from manufacturers including manufacturer, part number, product category Enrich data by mapping the items to industry standard templates and populating Cleanse and normalize long and short descriptions Get product images De-duplicate based on part numbers and attribute descriptions 31

32 OPERATIONS 32

33 Operations Fulfillment slightly lower satisfaction with warehouse and inventory levels. Quotation handling big concern with nearly 20% unsatisfied. Order handling Good except chat is underutilized. 33

34 Operations Best Practices If showing inventory, have accurate and as up to date counts as possible. Service level for web orders should be the same as any other channel. Lead times should be displayed and must be as accurate as possible. If using expected delivery dates, the same applies. Provide chat services with the same support level as the inbound calls. There should always be an order acknowledgement and a shipment . The shipment should include tracking information. Develop a coherent inventory and fulfillment plan. Test the plan before rollout. Always provide easy to locate contact information for web support, registration support, and quotation requests. 34

35 CONCLUSION 35

36 The Problem The way customers want to shop and buy is shifting toward more efficient vehicles and mechanisms Most distributors still have a field sales centric model even if they have begun a multi-channel offering National competitors who have effective multi-channel offerings are taking market share from smaller competitors Distributors understand they need some multi-channel offering, but are uncertain about the timing and requirements both within and beyond e-commerce

37 Future Online Transactions In 2 years Nearly half believe that 25% or more of transactions will be online One fifth believe that 11% to 25% of transactions will be online May 11,

38 Shopping What they do today: Manufacturer s website Search Distributor sales rep Your job is to make distributor s website increase in frequency 38

39 Communications Preferences Customers want to hear from you more than you know and in more ways than you suspect. But, notice that 15% of customers NEVER want a sales rep visit. The trend is toward more efficient interactions and transactions. 39

40 Conclusion E-commerce as part of a multi-channel offering is here to stay Absence of viable e-commerce channel will result in lost business, not just e-commerce business Companies of all sizes need to make the investment to be in market in 12 to 18 months The key is balancing build-buy. 40

41 Thank you! Jonathan Bein, Ph.D. Managing Partner 41

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