Digital technology has transformed multiple industries. Now distribution is on the cusp of its own omnichannel transition, with e-commerce as a core enabling channel. To succeed in an omnichannel world, distributors need to tailor their sales and marketing efforts to the right customers at the right moment and in the right channel.
For distributors, this capability was once seen as a “nice to have,” but customers increasingly expect it. Ninety-five percent of B2B buyers are willing to make purchases without interacting with salespeople.1 And they are channel-agnostic, using up to ten channels2 to make purchases in 2021, compared with five in 2016.3
As leading players in other sectors have proved, an omnichannel strategy can be a powerful driver of growth and profitability. Companies that implement omnichannel transformations report revenue growth of 5 to 15 percent and improvements in cost-to-serve efficiencies of 3 to 7 percent. They have also made strategic leaps to build long-term competitive advantage—for example, by building data-driven business models to better understand their customers.
What winning distributors are doing
E-commerce encompasses both digital transactions and the broad infrastructure that enables related services. To gauge the industry’s progress on e-commerce, McKinsey conducted a maturity scan of more than 30 distributors across six major sectors: building materials; maintenance, repair and operations (MRO); electrical; HVAC and plumbing; food services; and packaging. The scan revealed that most differentiation in digital sales strategies occurs in upper-funnel marketing and mid-funnel personalized user experiences. Conversely, end-to-end fulfillment is table stakes in most markets.
Successful distributors have tackled the omnichannel and e-commerce challenge by carefully evaluating customer expectations and building a thoughtful customer-centered digital road map.
For example, an electronics distributor built a three-year omnichannel strategy based on customer and competitor insights. The company implemented hundreds of customer-centric initiatives across digital marketing and B2B e-commerce, on a two-week release cycle, backed by more than 200 tests across marketing and personalization. To expedite service and continuously improve, it created a full-funnel “win room” and developed new approaches to paid search. Following the transformation, the company saw a 30 percent rise in traffic across more than 20 countries, and a 15 to 20 percent uplift in orders. That helped it capture a $250 million, or 35 percent, increase in incremental annualized revenue and achieve a 25 percent faster time to market.
Elsewhere, an automotive distributor created a long-term digital and omnichannel strategy, including many e-commerce growth initiatives. After building a mobile app, developing channel partnerships, and moving to an agile development model, the company doubled site traffic in just 12 months, with search engine marketing (SEM) traffic tripling and search engine optimization (SEO) traffic growing by 70 percent. And by identifying new categories, it boosted sales of online SKUs by 13 percent. Since the change, the company’s revenues have grown by 20 to 25 percent annually.
These movements in e-commerce and digital adoption raise a simple question for other distributors: Where are your biggest opportunities to accelerate your e-commerce and broader omnichannel efforts?
In an upcoming blog, we will share the key tactical steps distributors can take to close the e-commerce gap in their organizations.
1 McKinsey Distribution Practice Customer Survey, 2018–2022 survey of more than 3,500 buyers in 12 markets; McKinsey Global B2B Pulse (2020–2021); McKinsey Omnichannel Sales Insights 2020.
2 Email, procurement department, in-person/field, mobile app, phone, e-commerce portal, supplier website, web chat, google/web search, videoconference.
3 McKinsey Distribution Practice Customer Survey, 2018–2022 survey of more than 3,500 buyers in 12 markets; McKinsey Global B2B Pulse (2020–2021); McKinsey Omnichannel Sales Insights 2020.