In a virtual meeting, a B2B millennial (call him Joe) took over the screen and masterfully showed me (with pride) how he avoided both a repair contractor’s fee and a distributor’s high price.
Joe’s refrigerator was ailing. He googled a site that helped him identify the required repair parts. Then, he found an appliance-parts distributor’s site with an excellent, how-to-fix-it video. But, the distributor’s price was about $60, plus shipping and a delivery date of 5-7 days.
Joe reflexively checked at Amazon to find: $30; no shipping; and next day delivery. Amazon won. And, the fridge got fixed faster for less.
This tale has two types of dis-intermediation. A contractor lost labor-income (and parts markup?) on a simple, bread-n-butter job. And, the distributor lost the part sale. How will channel dis-intermediations accelerate with soaring B2B Cloud Ecommerce?
The distributor also got stripped of the video’s value and the part price-shopped or “web-roomed”. Millennials have showroomed retailers for years. Expect them to check distributors’ prices on all bigger-dollar SKUs/pick needs.
Higher-priced, popular SKUs are most net-profitable for distributors. The mark-ups on high-priced, popular goods typically go down less than the total price goes up. So, the Gross-Profit-Dollars per pick are greater than the fulfillment-dollar cost to yield a net-profit. They pay for the many, small-dollar-pick losers. Webrooming will cause either lost sales on or last-look, price-cuts for cream SKUs.
- How will channel players measure and correct the profit/loss cross-subsidies that exist between super-profitable and unprofitable SKUs?
- Many distributors are “winning” new, small, web-orders that are net-profit losers. How can they compete profitably with Amazon?
- An even bigger challenge: how will distributors rethink rep e-selling to millennials (who don’t want regular rep calls) by 2022?
- The distributor’s “how-to video” was valued. Best video-clips within a digital, sales funnel are forecasted to be important. How will B2B manufacturers use videos in their “digital-engagement strategy” for end-users?
- Best video-clip examples? At Amazon.com search “Echo”. Click on the “learn more” links to see what new, table-stakes videos look like.
For More On: Digital Transformations Within Distribution Channels
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