THE 2015 STATE OF E-COMMERCE IN DISTRIBUTION

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1 In partnership with THE 2015 STATE OF E-COMMERCE IN DISTRIBUTION A Survey of E-Commerce Objectives and Challenges Facing Wholesale Distribution Companies

2 Executive Summary Distributors didn t meet their e-commerce expectations in 2014, as the online sales and marketing channel saw relatively little growth from the previous year. Just 15 percent of respondents in the 2015 State of E-Commerce in Distribution survey reported 5-10 percent of their total sales derived from e-commerce, only a percentage point higher than 2013 and well short of the 20 percent expectation they had for last year. survey was sponsored by hybris software in partnership with Modern Distribution Management and Real Results Marketing. For the last two years, 42 percent of respondents reported e-commerce comprised less than 5 percent of their companies total sales, and 20 percent reported they had zero e-commerce presence in 2014, despite the continued migration of B2B sales in the online channel. A recent study conducted by Google and Millward Brown Digital revealed that 70 percent of all B2B buyers are doing research online before purchasing. But distributors have been slow to adapt, and they don t expect much growth with their e-commerce presence in 2015, with 42 percent of respondents expecting e-commerce sales to comprise none or less than 5 percent of their total sales, and 26 percent expecting it to comprise 5-10 percent of total sales MAR 17 MAR 23 MAR 29 APR 04 Wholesaler-distributors remain underwhelmed by the effectiveness of search marketing, with just 24 of respondents saying it is effective and 23 percent saying it is somewhat ineffective. They also view e-commerce as a way to promote their brand as much as they view it as a way to increase new customers and orders, with 20 percent of respondents listing each of those as their highest e-commerce priorities in This report provides an overview of the objectives and challenges distribution companies say they face around e-commerce today. 3Q 1Q 104 VISITS APR 10 APR 16 90% 50% 10% First Quarter Second Quarter Third Quarter Fourth Quarter Fifth Quarter

3 400 RESPONDENTS from wholesale distribution and manufacturing identified as a manager or above in their companies 500$ milliion - 1$ billion 100$ - 500$ million > 1$ billion 50$ - 100$ million ANNUAL REVENUE 10$ - 50$ million < than 10$ million Methodology The survey results presented in this whitepaper are the result of an online survey of readers from Modern Distribution Management ( and hybris software in January and February As a leader in digital transformation, hybris delivers state-of-the-art customer data management, context driven marketing tools and unified commerce processes for all channels. Modern Distribution Management is the premier source of research on the wholesale distribution industry and offers news, blogs and premium newsletters to executives in wholesale distribution businesses or that sell through or to wholesale distribution businesses. Data collected for this whitepaper was analyzed by Real Results Marketing. More than 400 respondents in wholesale distribution and manufacturing responded to the survey, with most identifying as wholesaler-distributors. More than 70 percent identified as a manager or above in their companies, with nearly 60 percent being the owner or the executive of their companies. Size distribution of respondents was diverse with 19 percent of respondents with less than $10 million in annual revenues; 22 percent with $10 million to $50 million; 15 percent with $50 million to $100 million; 15 percent from $100 million to $500 million; 7 percent with $500 million to $1 billion; and 13 percent over $1 billion. Sector representation was also diverse, with Industrial coming in as the largest with 66 percent of respondents. Respondents could name more than one sector, so totals will not equal 100 percent. Other sectors represented by respondents include Safety Products (37 percent); Electrical (37 percent); Building Materials & Construction Products (29 percent); HVACR/Plumbing Products (25 percent); and Hardware (25 percent). Others included Plumbing, Oil and Gas Products, Power Transmission/ Bearing, JanSan, Chemicals and Plastics, Electronics, and Pulp and Paper.

4 None E-Commerce Conditions and Expectations 10% to 20% 10% to 20% Not applicable Not applicable 20% to 30% 5% to 10% 20% to 30% 5% to 10% More than 40% More than 40% 30% to 40% 30% to 40% Less than 5% 2014 E-Commerce, as Percentage of Total Sales Fifteen percent of respondents reported 5-10 percent of their total sales in 2014 were from e-commerce. Forty-two percent of respondents reported that e-commerce sales currently comprised less than 5 percent of their total sales. Less than 5% None 20% to 30% None 20% to 30% Not applicable None Not applicable 30% to 40% 10% to 20% 30% to 40% More than 40% 10% to 20% More than 40% Less than 5% Less than 5% 2015 E-Commerce Growth Expectations Respondents don t overwhelmingly expect their sales to move online in 2015, with 42 percent of respondents expecting e-commerce sales to comprise none or less than 5 percent of total sales in 2015 and 26 percent expecting it to comprise 5-10 percent of total sales. 5% to 10% 5% to 10%

5 Top Priorities in E-Commerce 20% 10% For respondents, the top priorities for their e-commerce business are: Promote brand Increase new customers/orders acquired through website, search-engine marketing Ease of use, increased customer satisfaction Increased efficiency and operational cost savings More frequent use of website, e-commerce transactions by customers Productivity improvements for sales, marketing, support personnel Increase the size/quality of product content available to partners, customers Increased transaction size from additional items on orders Second and Third Priorities Respondents were more or less evenly split on what their second and third most important e-commerce priorities were; productivity improvements, increasing new customers/orders, ease of use/increased customer satisfaction, more frequent use of website/e-commerce transactions and increased efficiency were all comparably ranked second or third.

6 Not applicable, 10% Effectiveness of Search Marketing Respondents were divided about the effectiveness of search marketing; 24 percent said it was effective and 23 percent said it was somewhat ineffective. Ten percent found search marketing to be very effective, while another 10 percent found it to be very ineffective. Twenty-two percent of respondents weren t sure how effective their search marketing is. Very ineffective, 10% Effective, 24% Very effective, 10% I don t know, 22% Somewhat ineffective, 23%

7 Importance of Marketing Automation and Marketing for E-Commerce Business Regarding the importance of marketing automation and marketing, 29 percent of respondents declared website visitor tracking to be very important. Nineteen percent of respondents marked lead scoring as unimportant, with 15 percent marking shopping cart abandonment alerts as unimportant. s triggered by action from a Web visitor Lead scoring Shopping cart abandonment alerts Website visitor tracking Drip marketing/ lead nurturing Very unimportant Important Unimportant Don t know or not applicable

8 Satisfaction with Mobile Web Technologies Respondents were most satisfied with laptop computers with regard to their company s website support for mobile technologies, with tablet and smartphone capabilities in second and third, respectively. Respondents were least satisfied with their QR codes, mobile device apps and mobile device-optimized websites. How Satisfied Are You With Your Mobile Technology Capabilities? Mobile Apps QR Codes Laptop Computers Very Somewhat Dissatisfied W/n 12 mos. After 12 mos. No current plans Tablet Computers Smartphones Mobile Optimized Websites

9 Importance of E-Commerce Integration Respondents were mostly unanimous in their assessment of the top three integration capabilities for their e-commerce solutions. Data import was selected the most important capability with 60 percent, followed closely by data export (57 percent) and electronic data interchange, or EDI (56 percent). E-procurement Electronic data interchange (EDI) Extensible markup language (XML) Very unimportant Somewhat Important Unimportant Do not know Data import Data export

10 Effectiveness of Marketing Vehicles Respondents cited sales reps as the most effective marketing vehicle for driving demand to e-commerce channels. SEO/organic search ranked second, followed by and customer service rep as a marketing vehicle. Mass marketing/advertising, marketing automation, direct mail and webinars were considered the least effective marketing vehicles. 100% 80% Fifth 60% Fourth Third Second Most effective Catalog Customer Service rep Direct mail marketing Marketing automation Mass marketing/ advertising Mobile apps Paid search Sales rep SEO/ organic search Social media Videos Webinars 40% 20% 0%

11 Marketing Vehicle Spending Respondents cited catalogs as their biggest spend for marketing vehicles related to e-commerce, with marketing and SEO/organic search closely tied for second. Social media had the lowest spend, with videos ranked second-to-last. 100% 80% 60% Fifth Fourth Third Second Biggest spend Paid search SEO/ organic search marketing Marketing automation Direct mail Mass marketing/ advertising Videos Mobile apps Webinars Catalog Social media 40% 20% 0%

12 Website Support Respondents were least satisfied with their Web chat support. Respondents were most satisfied with their order entry support and inventory levels for Web orders. How Satisfied Are You With Your Website Support Functions? Registration support After order customer service support Very satisfied Satisfied Unsatisfied Not applicable Quotation handling Order entry support Accurate invoice history Webchat support Warehouse preparation for order volume Inventory level for Web orders

13 Website Capabilities Respondents were most satisfied with their websites company contact information/locations capabilities, with login/registration and basic search functionality coming in second and third, respectively. Respondents were most dissatisfied with their multisite enablement and product comparison features. How Satisfied Are You With Your Website Capabilities? Purchase suggestions Online help options Quote capabilites Links to business/ social media Advanced account management Very Somewhat Dissatisfied W/n 12 mos. After 12 mos. No current plans Advanced search Current stock level Online payment capability Link to manufacturer s website Personal product list Search results: customer specific pricing Tax and shipping cost estimates Product information BUY Order placement capabilities Link to business management software/erp Basic search Login/user registration Customized online product catalog Customized online product catalog Company contact info/locations

14 This survey was conducted in partnership with Real Results Marketing. Learn more information at About hybris software hybris software, an SAP company, provides omni-channel customer engagement and commerce solutions that allow organizations to build up a contextual understanding of their customers in realtime, deliver a more impactful, relevant customer experience and sell more goods, services and digital content across every touch point, channel and device. Through its state-of-the-art customer data management, context driven marketing tools and unified commerce processes, hybris has helped some of the world s leading organizations including 3M, ASICS, Bridgestone, EE, Galeries Lafayette, Johnson & Johnson, Levi Strauss & Co, Nestlé, Nespresso, Nikon, Rexel, Samsung Electronics, Ted Baker, Tommy Bahama and W.W. Grainger, to attract, retain, and grow a profitable customer base. hybris Commerce Suite and hybris Marketing sit right at the heart of SAP s customer engagement and commerce (CEC) suite of solutions, alongside SAP Cloud for Sales, SAP Cloud for Service and SAP CRM. These provide organizations with the foundation, framework and business tools to create a holistic customer view across channels, simplify customer engagement and solve complex business problems. sales@hybris.com Version: May 2015 Subject to change without prior notice hybris hybris is a trademark of the hybris Group. Other brand names are trademarks and registered trademarks of the respective companies.