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I think everyone would agree that manufacturing represents the best of us – infusing the economy with good jobs, good pay, and a path to a secure future for millions of Americans. That’s why it’s so hard to watch an industry I care so deeply about sluggishly respond to the worldwide shift to e-commerce.
The numbers are pretty astounding. Today, 8 out of 10 manufacturers still primarily depend on their internal sales team to drive revenue; and less than 1 out of 5 offer a digital buying experience. It’s no surprise that buyers prefer to source, vet and purchase from suppliers they find online, yet manufacturers continually fail to meet them there.
Fear drives complacency
Why is it so hard for manufacturers to meet this demand? Through my interviews with hundreds of manufacturers, one theme became apparent: fear. Fear of change and technology, fear of losing revenue, fear of inadequacy, and fear of risking relationships with dealers/distributors. This grappling fear is preventing manufacturers from taking the necessary steps to meet their customer’s online needs.
No one said change is easy, but manufacturers never shied away from investing in the quality of their products. However, the average manufacturer lags behind 10-15 years when it comes to investing in sales and operational processes.
Digitizing an operation is more than e-commerce
Digitizing an operation is more than building an e-commerce platform – it’s tying together all the back-end processes within a company’s supply chain to create a seamless experience. Companies are finding that selling direct requires a commitment to the back-end operation to make sure all areas (sales, finance, engineering, customer service, production, logistics, marketing, HR, etc.) are collaborating and the infrastructure is thoroughly in place. U.S. manufacturers are notorious for having huge amounts of manual administrative processes engrained in their employee culture. For many employees – especially those who have been around for years — a new way of operating can be very stressful and let’s face it – people tend to resist change.
For manufacturers, making the conversation to e-commerce sales can be lucrative. Don’t believe me – look at the statistics. According to Digital Commerce 360 — in 2019 U.S manufacturers’ B2B ecommerce sales grew by nearly 21% to $430.0 billion. That growth rate is nearly 20 times faster than the growth in total U.S. manufacturing sales.
Some suppliers simply turn to sites like Amazon to sell online. This often removes pricing controls and dilutes the brand, while forcing manufacturers to meet tight delivery deadlines. Amazon is known for placing stiff controls and penalties on sellers just for using the Amazon marketplace. Even worse, the Wall Street Journal reported that Amazon employees use data about independent sellers on its platform to research and develop competing products.
The pandemic and our future
Unfortunately, there has been a surge of bankruptcies among manufacturers as a result of COVID-19. However, the pandemic has forced a number of suppliers to digitize their operation and offer a self-serve experience from their website. In many cases this has saved businesses.
Moving forward, we’re seeing a shift to online that is not going back to business as usual. According to McKinsey and Company, more than 75% of buyers and sellers say they now prefer remote human engagement over face-to-face interactions. They appreciate the ability to research information, place orders and arrange service. In fact, the majority hope to continue the self-serve model as business returns to “normal.”
E-commerce is not just for smaller ticket-items, according to another study by McKinsey & Company, 70% of B2B decision-makers say they are open to making new, fully self-serve or remote purchases in excess of $50,000, and 27% would spend more than $500,000.
Add to this a changing demographic among buyers for vendors, dealers, and distributers. These professionals are now millennials with less brand allegiance. Outside the U.S., manufacturers in Asia have also been quickly capitalizing on this change to game the market and drive out American competitors.
The good news – and light at the end of the tunnel – is that companies with digitized operations are taking the lead and experiencing record growth during these hard times.
Manufacturing’s traditional selling processes are broken. Our next chapter requires a savvy digital approach backed by a deep understanding of buyer expectations. In turn, this empowers manufacturers to focus on what they do best – building amazing products.
About the author
Dusty Dean is setting a new standard for how manufacturers can build fast-growing new revenue streams. Dusty formed BITCADET as a one-stop source for manufacturers who are serious about building a digital sales strategy and growing beyond their dreams. He built an expert team of technologists, digital sales experts, and industry analysts to function as his clients’ outsourced digital growth department that delivers revenue growth on an accelerated schedule. Dusty’s philosophy is for his team to do all the work so clients can focus on what they do best – building and shipping quality products.