Considerations When Selling Online to the Contractor Customer
The trading of goods and services by the internet is not a new concept. New compared to the PHCP-PVF distribution industry, sure, but “e-commerce” has been growing and maturing for more than 25 years.
In that time, digital native sellers have created a whole new level of buyer expectations that is unparalleled in both its scale and its penetration of the population. This swift and pervasive success has led some to believe that this model is the most powerful and singularly successful model of e-commerce, and that one must mimic this model as closely as possible to be successful online.
We here at ASA’s DNext lab do not hold this belief to be true.
This B2C model is fueled by unrestricted consumer desire for infinite variety, and is built to provide access to endless inventory. In the PHCP-PVF world, the contractor customer is more educated, the need more constrained, and the ask more attainable with only a small shift in perspective. Instead of serving anyone, anything, anywhere, anytime, distributors provide the same materials to the same people for the same tasks. This fundamental difference allows the creation of a fulfilling online experience for contractor customers.
Let’s begin by backing up and defining what, precisely, we mean by e-commerce. Formally, e-commerce is defined as the buying and selling of goods and services utilizing the internet. Generally, when we talk about e-commerce, we’re talking about the online B2C consumer experience. There is frequently a lack of precision in the language here — speaking as though this B2C experience is the only relevant or meaningful experience assumes that the expectations set by it are universal to all of e-Commerce.
That, of course, is not necessarily true. A buyer’s expectations, whether they be a consumer or a business representative, are set by what they want and what they need, and in turn, this dictates what features and functionality an online experience provides. The salient point is that the features are not directed at expectations, they are directed at wants and needs.
B2C e-commerce infrastructure
To understand why we believe these expectations are not universal, let us take a closer look at the infrastructure that underpins this B2C e-commerce model. Start with a representative consumer, someone who has decided that they want to buy some item. They don’t know which specific item, so first they need to do research, checking across review sites, determining what products currently exist, what their reputations are, rough price points, etc.
Much of this research is done on other websites, potentially sponsored by but ultimately out of the manufacturer’s control. Some of this research may be done on the e-commerce site as well, requiring functionality such as search and filter functions, comparison and “similar products include” functions, reviews, photos, specs, advertising, and more.
Certain things such as price and stock status need to be the first thing visible, as consumers exhibit little platform loyalty if they can find a product elsewhere cheaper or faster. There are a growing number of payment methods that are going from being luxuries to necessities, particularly with the expansion of buy-now/pay-later programs, such as Klarna and Sezzle.
Businesses can expect no patience from consumers, both in the purchasing process and in shipping times. One click to buy and two days to arrive is the standard. They expect a completely transparent understanding of the status of their item at all points along the delivery chain and a clear estimate for arrival, supported by comprehensive order tracking. And after all this, there is an expectation of frictionless and even free returns, which makes the return process a significant factor on the bottom line.
It is important to consider why B2C e-commerce is structured this way. The infrastructure required to create this experience costs millions for a sale that may make pennies of profit. We believe that the only reason that they endure these costs is because it is necessary to make this business model work.
The vast majority of this structure is created to guide a consumer through a transaction and ease their experience, to make the first purchase as smooth as the thousandth. This allows these companies to reach and sell to nearly every working person on the planet, distributing millions in cost over billions of sales. Trying to replicate this e-commerce experience today presents a chicken-and-egg problem: without the infrastructure, the general public will struggle to purchase from you, but without that massive customer base you can’t afford the infrastructure.
Thankfully, so long as you aren’t trying to sell to the general public, you don’t have this problem.
The path forward for distributors
And here at D.Next, we believe that the path forward for distributors is not in direct competition with household-name retailers, but in differentiation from them. Contractors have different incentives than an average consumer because they are acting as an agent of a business rather than an individual.
They have a professional need for your products, not just a desire; they both experience and exert agency over the pricing of the products that they buy; and their professional reputation and ability to do business relies on your professional competency and consistency. Because of this, contractors require a different approach than the average consumer.
Contractors only really need to know if you have a product, what it costs, and how quickly you can put it in their hand, which necessitates a different online experience to support their business. These alternative requirements simplify the necessary infrastructure massively. The vast majority of features used for research, such as advertising, reviews, most search functionality and comparative functions, are less necessary for well-informed contractors. You don’t need to worry about meeting consumer-level expectations of delivery speed or accommodate double-digit returns. And lastly, you don’t need to take or process novel forms of payment.
The remaining infrastructure that is necessary to address contractors’ needs is more attainable. Contractor customers need to log in, check if items are in stock at a location, and perhaps place an order for pickup or request the distributor order an item.
The good news
Here is the key point: all these functions parallel existing business processes. Your contractors have accounts. You know what’s in stock. They place orders via phone now, and they specify pickup details as needed. Creating an online experience to fulfill these needs does not require the creation of entirely new business processes, cutting the required investment significantly. We believe that building this online functionality is an impactful step you can take towards cementing your place in the future.
Further, there are many options for functionalities that you can implement, with varying levels of investment. If you want to just dip your toes in, you could show what is in stock at each location behind a login. That would be an initial step that would still significantly smooth one of your contractors' friction points. If you want to do online ordering but only want to allow them to order items you have in stock, that would significantly simplify the required backend. If you want to require a human to approve an order before it processes, or even have a human process the order the way you do now, an online portal still opens a new channel of purchase.
We’ve written about using texting programs to communicate with the segment of professionals who prefer to avoid phone calls – that’s another example of an ease of doing business improvement with relatively low investment. There are many different levels of a digital experience that you can provide, and many different kinds of interactions that you can implement to serve contractors’ needs.
That said, we would like to caution against over-automation. Everyone’s had the experience of trying to navigate the phone chatbot at the bank or fighting your way through a system to unsubscribe from an email list. These online interactions should be viewed as an augmentation of existing capabilities rather than a replacement of existing business functions. In our project on ordering and receiving trends, one of the things we uncovered was that a full half of your current contractor customers prefer only face-to-face interaction, across age, profession and position. Distributors already provide an experience that they prefer; digitization is a means by which you can maintain your relevancy with increasingly digitally-native newcomers as the demographics of the industry continue to shift toward the Y & Z generations.
Building and maintaining relationships
The other long-term benefit of digitization is allowing your employees to focus less time on the day-to-day operation of the distributor and more time on building and maintaining relationships with your contractors. In our previous research, we stated that the elements of value generated by a distributor fall into levels, each level supported by the levels below.
Answering calls, processing orders, generating quotes and other activities that are frequently manually done at distributors fall into the lower levels — necessary to the functioning of the business, but providing no differentiation from your competition. Digitization allows you to shift time away from these tasks, freeing more time to focus on elements such as improving speed of service, smoothing the purchase process, reducing order errors and helping contractors with their own problems. Because providing these services and this information digitally does not require a person to be present, it also allows a distributor to service more contractors simultaneously.
Ultimately, we believe that online functionality will act as a key differentiator in the years to come, both from industry-sized threats and from local competition. We have discussed how the needs of a contractor differ from that of a consumer, and how the functionality necessary to meet their needs may be smaller than previously believed.
By creating a digital experience for your contractor customers, you enable your employees to spend more of their time and energy on the higher elements of value. This allows you to support the business of your contractors, differentiate yourself from your competitors, and strengthen the industry as a whole.
By Beth Ladd
Vice President of Innovation