Competing in Wholesale and Distribution
with
Digital Transformation
in
the Age of AI

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Digital Progress

Of all the industry sectors Wholesale and Distribution are probably the most threatened by ecommerce. Manufacturers are beginning to sell directly to consumers or sell through mass market platforms such as Amazon or directly to retailers. The geographical territory of the wholesaler or distributor is increasingly becoming less relevant and the realm of the commission salesperson, the so called “middleman”, except for some specialized industries such as pharmaceuticals, is threatened to its very core. Although the jury is still out, the change to ecommerce is seen by some to be both a threat and an opportunity. Enter Digital Transformation.

For the Wholesale and Distribution industry, the digital transformative emphasis seems to have been, and so promoted by vendors in some cases, on technology and operational matters with too little a focus on commercial strategy and the needed digital reinvention of customer engagement. In the meanwhile, according to Forrester, a market research company, almost 40% of B2B buyers are now finishing their purchases on Amazon. The percentage of B2B buyers finishing their purchases on distributor sites has fallen from 30% in 2015 to 16% in 2017. Buyers prefer sites like Amazon that are easy to use, fast, with broad selection, limited login requirements, and built-in trust. Amazon is part-platform, part-marketplace, and part-reseller. By various estimates, Amazon currently sells one-third via digital e-commerce sales, one-third via reselling/white labeling, and one-third via third-party resellers.

That the B2B wholesalers and distributors are under threat is not in doubt. For example. In wiring connectors, Amazon Business has 77,764 listings compared to a Big-4 distributor’s 2,855. Amazon has products listed from 106 of the 120 manufacturers offered by a Big- 4 distributor. Even worse for distributors, 96 of these 120 distributors, or 80%, already sell directly on Amazon and prices on Amazon are often 25 to 30% less. Between Alibaba and Amazon Business there seems to remain very little space for survival. Compared to this existential threat and in spite of Covid-19, the degree and pace of any appropriate or commensurate digital response (Resilience), being mounted by the Wholesale & Disgtribution industry, can only be assessed to be on the low side and of the order of 20-25%.

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