As the retail landscape becomes increasingly digitized, many manufacturers have found ways to sell directly to their consumers, negating the need for distributors. As a result, distributors rightly worry that their role in the supply chain is under threat.
The emergence of Amazon, Etsy, and even the Dollar Shave Club is clear proof that third-party distributors are being pushed out of the picture as businesses continue to look for direct-selling opportunities.
Direct-to-consumer (DTC)—selling products and services directly to buyers—is only rising in popularity. A report from Shopify Plus found that almost 40 percent of the sales growth in the retail sector is due to the increase in DTC. More companies are shifting away from traditional retail and adapting to this new trend.
Shifting from a business-to-consumer (B2C) business model to a more direct channel offers a couple of big advantages: greater brand loyalty and more sales. But the shift is challenging small distributors’ position as an essential resource in the supply chain.
The good news is that digital transformation—in particular, the use of an enterprise resource planning (ERP) system such as SAP Business One—can help these distributors adapt to the rising challenges posed by the shift from B2C to DTC.
Get the Tools You Need to Compete
Prominent retail brands and ecommerce giants continue to expand their business operations and test the DTC business model, hoping to offer unbridled convenience to their customers. The resulting brand loyalty and enhanced growth seem to make up for the added effort required to handle sales in-house.
Due to this shift to online sales channels, the role of distributors is diminishing. They are now up against large ecommerce brands that leverage automated business operations and advanced strategic tools that include analytics and artificial intelligence.
“The problem that the distributors need to solve today is automating the transaction relation with Amazon and eBay. These are called the eMarketplaces now, as they are the dot-coms that people are going to for order fulfillment,” notes Ralph Hess, vice president of sales for Navigator Business Solutions, in a recent conversation about the changing role of distribution.
However, all is not lost. An ERP system can provide distributors with the tools they need to leverage technology and redefine their roles. ERP software allows distributors to both compete with the big players on a more equal footing and cooperate with them by better integrating with their online marketplaces. ERP systems offer scalability and equip distributors with all the business intelligence and data needed for effective decision-making. From demand planning to complete supply chain management, ERP helps distributors give tough competition to all these large firms through transparent business operations.
Take Control of Warehousing
A lack of warehousing tools and technologies is another reason why the B2C to DTC shift is sidelining small distributors. This leads to frequent inventory management failures that affect profit margins and result in customer frustration.
The only way for distributors to deal with this is by leveraging advanced technology that transforms their business operations and increases revenue.
ERP software is key to gaining complete visibility into each step of the supply chain and keeping track of all products in real-time. A suitable cloud-based ERP enables distributors to automate their order fulfillment, reducing the risks of errors associated with implementing multiple systems.
This streamlines the business processes by syncing previous and real-time information on inventory and other warehouse processes to help distributors plan for the shift.
Deliver Data Customers Want
Customers no longer want to waste time looking for the best deals and suppliers. They require a hassle-free shopping experience that offers reliability and personalization without the need to haggle online.
This has resulted in digitized buyer journeys that enable people to make purchases through mobile phones, websites, and other online marketplaces. Customers expect businesses to offer multi-channel communication and real-time information on their products.
Distributors must now offer seamless customer service on other sales and support channels to deliver a satisfactory customer experience in this competitive landscape. An ERP platform provides a centralized system where distributors can store all their customers’ information. It also enables them to create a self-serve customer portal to access the information they need on specific products and even ask questions. The ERP system also can suggest the best next step through real-time information from embedded analytics.
Reinvention is an Opportunity
For the longest time, distributors have worked as middlemen, mediating processes between suppliers and customers. But with the shift from B2C to DTC and the rise of online purchasing, that role is diminishing. Distributors need to reinvent their businesses by employing the latest technology and developing a fresh mindset. This enables them to empower their employees and focus on effective decision-making to expand their business and move forward to get more opportunities.
“Owing to the business transformation that has been happening over the last few years, distributors need a more robust business management platform to shift to a digital core and adapt to these changes in the industry,” says Hess.
And he’s right. An ERP system equips distributors with simple tools, seamless collaboration and automated operations that create a positive workplace environment. Moreover, it moves them away from old business models that only serve traditional retail channels.
The transformation begins with a transition to a digital core. With data encryption, high-speed performance, complete transparency, and regular backups, distributors can ensure that they remain relevant as the market changes.