UPS Report Finds Traditional Industrial Distributor Model Faces Mounting Risk
June 13 2017 - 7:03AM
Asset-light e-marketplaces and other nontraditional shopping
channels, combined with shifting demographics, are upending
industrial distributors’ inventory-heavy model more rapidly than
previously thought. As a result, distributors must quickly adapt
and address threats with everything from sharper mobile offerings
to upgraded customer service, a new white paper from UPS (NYSE:
UPS) shows.
According to the UPS Industrial Buying Dynamics Study: Buyers
Raise the Bar for Suppliers, the biggest shift comes from
millennials (defined for this study as those currently ages 21-34)
who grew up in a digital era and are bringing their tech-savvy and
nontraditional purchasing habits – for example, bypassing the
middle man and working directly with the manufacturer – with them
into the workplace. The impact on the future of industrial products
purchasing may be among the most profound of any modern generation
of buyers and provide a glimpse of the future.
The report, the third such study compiled since 2013, captures a
sector undergoing demand changes and channel shifts at a startling
speed: 81 percent of buyers have purchased directly from
manufacturers, up from 64 percent in 2015. Meanwhile, 75 percent of
buyers surveyed have shopped at an e-marketplace, soaring from just
20 percent in 2013. What’s more, 80 percent of buyers are likely to
shift to suppliers with a more user-friendly web presence, up from
72 percent two years ago.
“With e-commerce, industrial buyers can choose from numerous
suppliers with the click of a button, leaving the traditional
business-to-business distributor model threatened,” said Matthew
Guffey, vice president of UPS segment marketing. “Maintaining the
status quo, even just for now, is not an effective solution.
Distributors have to up their game.”
The paper identifies four main ways for distributors – including
those with smaller ambitions or limited funds – to remain
competitive and offers solutions to reach these young corporate
buyers where and how they want to interact:
- Recognize rising threats: It is imperative to consider
strategic investments that bring services to parity with
competitors. The paper found that more than half of respondents
working primarily with distributors intend to increase
e-marketplace spending, representing a looming risk to
distributors.
- Think digital: Online channels are a necessity and
distributors need to strengthen e-commerce capabilities,
particularly for mobile ordering. Thirty percent of corporate
buyers use mobile channels to order industrial products, and 24
percent are “extremely likely” to do so in the future. Nearly half
of all buyers – and 69 percent of millennials – indicated they
would likely shift business to a distributor offering a mobile
app.
- Address buyers’ needs by product: Partnerships can help
make businesses more competitive. Look into purchasing insurance on
products and shipments to mitigate risk and to help protect and
improve cash flow; leverage a logistics provider’s global network
to ramp up service more quickly and reach more pockets of
growth.
- Go beyond the sale: Buyers want interaction beyond the
sale (i.e. post-sales support), with half of respondents stating
they would switch to a supplier offering assistance with returns,
training and on-site maintenance or repairs. Thirty-six percent of
millennials need services at least once per month, compared with
just eight percent of Baby Boomers, according to the study.
UPS and TNS conducted the survey of 1,500 buyers of industrial
products who are between the ages of 21 and 70 in the United
States. Respondents purchased industrial parts, products or
supplies in five product categories: equipment sold in a
business-to-business transaction; final assembly OEM (original
equipment manufacturer) parts; MRO (maintenance, repair and
operations) parts; consumables/raw materials – input items used in
a manufacturing process; and janitorial and sanitation.
Participants came from companies of all sizes, with roughly
one-third reporting annual revenue of $1 million; one-third
reporting between $1 million and $10 million; and one-third
reporting more than $10 million.
About UPS
UPS (NYSE: UPS) is a global leader in logistics, offering a
broad range of solutions including transporting packages and
freight; facilitating international trade, and deploying advanced
technology to more efficiently manage the world of business.
Headquartered in Atlanta, UPS serves more than 220 countries and
territories worldwide. The company can be found on the web
at ups.com® or pressroom.ups.com and its corporate blog can be
found at longitudes.ups.com. To get UPS news direct,
follow @UPS_News on Twitter.
Dawn Wotapka
404-828-8896
dwotapka@ups.com
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