Mark Sutherland

The personal site of Mark Sutherland, eCommerce & Digital Leader


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B2B Online – a conference for manufacturers and distributors

b2bonlineI attended the B2B Online conference in Amsterdam over the past two days, and thought it worthwhile penning some notes for a wider following. B2B Online is specifically aimed at manufacturers and distributors across all industry sectors and aims to highlight and discuss the issues facing these businesses as they confront the challenge of digital commerce. This is the second year that the conference has been held in Europe, and whilst last year I attended and spoke on behalf of a construction company, this year I was here as a Ricoh representative.

 

What’s striking is that the themes that come out in discussion are not vertical specific; manufacturers of all sizes and in all industries are battling with the same challenges – should our websites mention price and availability? should our sites be mobile and tablet enabled? should the shop be open to google or closed and by invitation only? How do we adapt to the change in B2B sales practices – where 90% of market research is done online and 66% of the sales process is complete before the customer ever contacts a salesperson? How do we all react to the threat that digital disruptors like Amazon business pose to our markets? What’s the role that is played by distribution and dealers?

 

What’s interesting is that the biggest hurdle faced by all the companies I met and listened to, from SKF to Philips Lighting, Siemens to Eriks, Xerox to RS Components, is not technical or functional but cultural – how willing is the organisation to react to the challenge that digital change poses to the existing business model and ways of working? As someone who started his career in b2b face to face sales, bolstered by telephone cold-calling and faxshots, I’m really conscious that we need to build a model of digital engagement that compliments the relationship that only a skilled sales person can achieve with a client. And that’s a message that came through from the conference – digital isn’t a “bolt-on” or a “threat” or an “option”, it’s the world we now live in.

 

Most buyers are now millennials – born after 1982. They’ve grown up with technology and the internet. Their first preference is to look online for a product or service and their second is to engage via webchat. Only reluctantly do they pick up the ‘phone and speak to a salesperson. The same is true in customer service and aftercare. My role here at Ricoh is to help our customers engage with Ricoh in the way that they now prefer to do business. There’s a lot of work to do and some exciting and challenging times ahead.


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Data and the Single-Customer View

I was recently asked for my views on the Single-Customer view as part of the eCommerce Insights blog titled, ”

Single Customer View Cynics vs Believers: Is SCV within reach or a mythical beast?”

 

My contribution is reprinted below and the full article is listed here

 
“I have some doubts as to the single customer view and how important it is. This is not because I don’t believe that it’s appropriate for some businesses and some industries but I don’t think it’s always applicable in the (B2B) organisation I currently work in. So, where does it work? Definitely in a B2C environment, where it truly is an individual that you are working with; it makes absolute sense for all parts of your organisation from marketing, to sales, service and aftercare to be working with a holistic view of the customer’s account and his or her engagement with your organisation.

However, in many B2B organisations there are often matrix organisations dealing with other matrix organisations. For example, SIG comprises lots of businesses purchased over time, some of which manufacture their own products, and many of which distribute products. An engagement may be with one organisation from a financial point of view – for example if ABC Construction deals with us, all invoices may ultimately be paid through one account – but it’s actually more likely that ABC Construction has several operating arms, each with their own purchasing entities, and dealing with individual parts of SIG.

Buyer behaviour and project management strategies may differ wildly within different functional entities within what is nominally a single organisation; and this tendency grows in my experience the larger the organisation you are working with.

So what do you think? Am I right? Please comment below.


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2015 B2B eCommerce Report – Extract

Last year I contributed to the UBM B2B eCommerce Report. Below I’ve reprinted the questions posed by the UBM team, and my responses to them. The full report is available here

WHAT DOES B2B ECOMMERCE LOOK LIKE TODAY?

UBM

B2B ecommerce is currently dominated by industrysponsored marketplaces relying on low-cost Internet platforms and ‘harnessing the value proposition of collective bargaining/selling’*4. While large and international enterprises have started independent markets to migrate services such as aftermarket, support or lead generation to online platforms most B2B business models vary from single firm-sponsored, e-procurement solutions and consortiums to collaborative marketplaces that aggregate demand and supply services. B2B models are also moving away from legacy systems which used EDI (electronic data interchange), toward online platforms where buyers and sellers can meet from anywhere in the world on the Web to transact goods and services with only a PC and the Internet.

Mark Sutherland

B2B ecommerce is fragmented at the moment, with very different solutions being available across the market, depending on the size of the customer base. For large corporates and the public sector eprocurement on agreed contracts through marketplaces such as Ariba, Procserve and Science Warehouse is commonplace, whilst for the SMB sector it’s much more usual to have a very similar setup to a B2C site. The challenge comes with the mid-sized corporates; those which haven’t invested in linking their ERP to their online purchasing, but who require workflow to be implemented on the supplier’s website.

IS THERE A DEMAND FOR ECOMMERCE IN THE B2B LANDSCAPE?

UBM

As consumers become ever-more comfortable researching, making purchasing decisions and ultimately buying online in the B2C environment, it is only natural that the same demand for an easy online buying experience will permeate their professional surroundings. A recent survey*5 conducted by Accenture found that 49% of B2B buyers prefer making work-related purchases on B2C websites, with 52% expecting at least half of their purchases to be made online in three years’ time. An additional 69% of B2B buyers prefer to pay direct using credit cards or payment systems rather than via purchase orders and invoices. In response, 83% of B2B suppliers surveyed are either in the process of implementing or upgrading their ecommerce platform or planning to do so within six months. The survey also found that 66% of B2B suppliers acknowledge shifting customer expectations and these are driving their technology investments. 83% acknowledged that Omni-channel strategy is critical to a company’s long term success and 85% identify Omni-channel as the crux for tech investment decisions

Mark Sutherland

There’s huge demand for ecommerce in B2B – the UK public sector alone has separate systems for the Scottish, Welsh and Northern Irish governments, as well as NHS and University focused systems. Personally, I’ve dealt with global corporates like Atkins, Thomson Reuters and Oracle as well as smaller UK based firms of every size. The benefits of reducing administration and human error at both supplier and purchaser side are clear. The EU has set a deadline of 2016 for eprocurement implementation and they believe that they will save €100bn (£82bn) annually from the €2 trillion (£1.6 trillion) procurement spend by government organisations across the EU by mandating eprocurement.

WHAT CAN BE LEARNED FROM B2C ECOMMERCE AND WHERE DOES B2B DIFFER FROM B2C?

Mark Sutherland

B2C ecommerce provides B2B with a challenge, because it sets the standards for our users. So B2B users are coming to expect Amazon or Tesco style performance when purchasing in their work life, because they are used to that at home. So clear product presentation, quick faceted search, access to supporting media – all are prerequisites for the B2B buyer. B2B clients are typically operating against an agreed, personalised price structure, with a contract in place to refer to. Their need for eprocurement is often to handle the ‘dayto-day’ business, whilst a relationship with the existing sales operation is needed for the more complex projects or to negotiate terms in the first place.

The ongoing relationship, the ease of use of the site and ease of access to business critical information like invoices or Proof of Delivery notes matter a great deal when a B2B client is selecting the supplier they are looking to purchase through. At my last company we had almost 50% of users whose roles were not to place orders, but to process invoices and to ensure that goods had arrived at the correct delivery address.

WHAT ARE THE CHALLENGES TO A SUCCESSFUL B2B ECOMMERCE OPERATION?

UBM

Most B2B businesses either wishing to launch an ecommerce arm or strengthen their online presence are faced with some multifaceted challenges. These include the complexity of the proposition, especially when compared with B2C, and modernisation of the organisational infrastructure. Other challenges include:

• Buying cycle (lengthy and complex)

• Omni-channel

• Big data

• Implementation costs

• Conflicts of interest between direct and online sales channels

• Online marketplaces – competition and raising customer expectation

Mark Sutherland

When you couple the requirement for a B2C experience with the challenges of a much larger product range (typically 20k products would be a small B2B website), a requirement for much greater product detail in the form of associated PDF or media documents, and the need to implement personalised pricing with a workflow structure, you start to see the complexity of a B2B site is an order above that of a typical B2C operation

WHERE IS INNOVATION NEEDED?

UBM

Innovation in both people skills and software is needed for B2B ecommerce to be able to really take off and offer the customer a personalised, seamless customer experience online. Developments and enhancements that will help organisations meet the challenges described above will go a long way toward helping to develop B2B ecommerce in the right direction.

Mark Sutherland

The major areas where innovation is needed is not so much in technology but in organisations culturally understanding where eCommerce fits into their sales and marketing operations. Essentially eCommerce shouldn’t be seen as a threat to the relationship building operation that sales teams undertake, it should remove much of the administration that bogs sales teams down – if it’s positioned correctly. I’ve seen sales directors who don’t appreciate what eCommerce can do for them blindly head over a precipice where their teams simply cannot support the work they are trying to commit to – winning contracts that you cannot fulfil is the biggest danger to the organisation’s reputation if the benefits of ecommerce are not realised.

On the marketing side, a greater understanding of when to use a digital message and when a traditional media message is required – so many companies are still not on top of their social media presence, and don’t have a programme to boost their followers and presence online, not appreciating the value that this gives in search terms and therefore new business. One of my old companies still has the same web presence and marketing structure that they had 6 or 7 years ago – although the majority of their lead generation is now via Google

WHERE DO YOU SEE THE FUTURE FOR B2B ECOMMERCE HEADED?

Mark Sutherland

If those of us in the industry work with the traditional elements of sales, marketing and operations within our organisations, then there won’t be any need for a dedicated ecommerce team in the future – we will have embraced a true Omni-channel approach to business structure, such that web sales and sales will just be “sales”. That said, I don’t think we’ll be there in five years, cultural change in British business is much slower than technology change.

What I expect is that the majority of companies will have recognised that there are significant efficiencies in embracing ecommerce and specifically eprocurement, and therefore procurement teams will be leaner and will be responsible for negotiating agreements and contracts rather than processing paperwork, with decentralised buying the norm in organisations. This will mean more web purchasing of product by people operating out in the field, and therefore B2B websites will become just as responsive and dynamic as the giants of retail.


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B2B Online Conference

Looking forward to speaking at B2B online next week, and to meet some really inspiring Digital Leaders

http://b2bonlineeu.wbresearch.com/mark-sutherland-speaker
http://b2bonlineeu.wbresearch.com/mark-sutherland-speaker


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B2B Ecommerce in the UK Construction market

B2B Ecommerce in the UK Construction market

B2B Ecommerce in the construction market is in an interesting place; currently very few true online offerings exist – with client specific pricing, a good range of product, and a convincing logistics solution to back it up. The opportunities for a company which gets this right are huge, and the potential costs to a company which delays implementing eCommerce are correspondingly clear, as Forrester explained in their report, “Online and Mobile Are Transforming B2B Commerce”, available here

Every day that B2B companies fail to offer a compelling B2B eCommerce experience, they fall farther behind more advanced competitors. Specifically, they risk losing market share to B2B rivals already executing an eCommerce strategy … For B2B distributors and wholesalers in particular that rely on adding value as middlemen, failing to exploit online and mobile as leading channels … represents an existential threat to their businesses.

The digital transformation is changing the B2B landscape quickly. This blogpost aims to look at the factors affecting the UK construction market, and why eCommerce is destined to play a big part in the construction industry’s future.

Set against the pattern of sustained growth in the overall UK economy now totaling 10 consecutive quarters as the recovery from the recession of 2008/09 continues, construction output has been slowing recently, despite a continuing rise in houseprices sustained since late 2013.

The Office of National Statistics comments,
… the data for June 2015 continues a run of relatively weak monthly growth. The annual rate of construction output growth has slowed from 10.2% in the year to June 2014 and a recent high of 11.2% in the year to December 2014, to 2.6% in the year to June 2015…
 


…The recent easing of construction output growth is partly due to a slowdown in housing output growth… Private house building, which accounts for the largest share of total housing output, grew by 8.5% in the year to June 2015, while public housing output fell by 9.8% over the same period, putting downward pressure on housing output overall.
 
House price inflation England & Wales 2008 to May 2015, Source Land Registry
The slowdown in housing output growth may be due to the slower pace of house price growth affecting building incentives and skill shortages which affect the ability of firms to deliver new housing units… The imbalance between demand and supply of houses on the market may partly explain why house prices continue to rise albeit at a slower rate.
 
The Office of National Statistics (ONS) most recent report shows that eCommerce sales have grown steadily since 2008 to £557bn in 2013, representing nearly 20% of business turnover, although the ONS data does show a small drop from 2011 to 2012 as reported EDI[1]sales fell year on year[2]. This proportion has grown from around 14% of turnover in 2008.
EDI sales of £364bn made up almost two-thirds of the total value of ecommerce sales, the remainder £193bn being website sales, as although the volume of website sales was three times greater than EDI transactions, the average value of EDI sales is much greater.
Value of total sales derived from e-commerce sales – source ONS

The proportion of businesses undertaking eCommerce as a sales channel also rose to 22% in 2013, up from 17% in 2009, the earliest year where comparable records are available. The UK’s largest businesses, those employing more than 1000 people, continue to dominate eCommerce sales with just under half (46%) of all eCommerce sales in 2013.

Critically, the proportion of businesses making eCommerce purchases exceeded 50% for the first time in 2013, indicating that electronic purchasing either via website or EDI is now the business norm across all industries (ONS).


Given the general strength in the economy as a whole the trend towards eCommerce growth will have continued within the B2B marketplace; analysts Frost and Sullivan predict that globally by 2020, “27% of the $25 trillion trade by manufacturing and wholesale businesses is projected to move through online e-commerce platforms – a total of more than $6.7 trillion.” 

Whilst that relates to the global market, the increasing rate of eCommerce spend in the UK B2B space is further illustrated by data from Statistica, showing that between 2012 and 2013 B2B website sales in the UK grew far faster than their B2C equivalents, albeit from a lower base, and Advansys stating that with the introduction of Amazon supply and Google shopping suggesting that the B2B market will be twice the size of B2C by the close of 2014.

UK B2B & B2C ecommerce sales 2012 & 2013 (Statistica)

The digital transformation is also changing the way that B2B companies sell and market to their customers and compete within a supply chain as well as with traditional rivals. Forrester surveyed 717 B2B companies across the globe. Key findings were:-

  • 50% are currently selling direct to customers online
  • 69% expect to stop producing paper catalogues in the next 5 years
  • 41% sell against their own wholesalers, distributors and suppliers
The continued pressure on costs and trends towards centralised & collaborative purchasing to maintain control but give users an input into decision making means that online B2B purchasing is becoming more like a B2C retail experience, with procurement websites taking on features such as user product reviews and a ‘look and feel’ matching the best retail environments, at the same time as the big B2C retailers look towards the business market for new customers.
 
Below you have examples of similar products marketed by Amazon, and Grainger, an industrial supplies company. The look and feel adopted by Grainger is very close to that of Amazon, although the B2B nature of the site is highlighted by the auto-reorder function and prominence of the UNSPSC code. 
 
Spot the difference (1) – Amazon.com

 

Spot the difference (2) Grainger.com
The construction industry globally has taken time to adapt to the changes and opportunities posed by eCommerce. A study by the Havard Business Review placed construction contractors at the bottom of a survey investigating how 20 different industries were responding to the digital challenge. The UK construction industry was the smallest contributor to the value of eCommerce sales across the UK economy in 2013, making up only 1% of the total value of online sales. ONS
Why has the construction industry taken so long to start to adopt eCommerce as part of it’s procurement and supply strategy? The 2013 research report into the UK Construction Industry for the Department for Business Innovation & Skills highlights that the industry faces some challenges in modernising its approach to the supply chain, including that the industry is focused too much on waste as a physical issue, rather than a process problem. As the reports authors state,
 
Interviews show that the industry’s focus is on the reduction of physical waste. Most respondents did not recognise other aspects of duplication or loss of value as waste; In our view, waste is embedded into industry’s structure, risk management practice and working culture. Addressing the narrow view of waste as a physical by-product of construction will create opportunities for performance improvement; We found little awareness of opportunity, insufficient ability to act and only limited incentive to improve performance with respect to removing all sources of waste from projects.”
Clearly eCommerce can play a huge part in reducing waste and increasing productivity. A United Nations study showed that eCommerce contributed 17% of labour productivity growth across Europe between 2003 and 2010. That such productivity gains are less obvious than waste material is self-evident, but not really an excuse for the Construction industry being so lax in adapting to change.
However, change is starting to happen. Although from the low base noted above, the Construction sector reported the highest percentage increase in total e-commerce sales in 2013, an increase of 50%, from £4 billion in 2012 to £6 billion in 2013. (ONS) Should this trend continue total online Construction sales would be expected to be around £10bn in 2015 or around 13% of total Construction Industry turnover (£76bn in 2014).
As a consqeuence suppliers are starting to change their strategy and key players such as Travis Perkins, Wolsley, and SIG are in the throws of launching or capitalising on this opportunity. Smaller players are also getting involved with the Hull-based MKM, being amongst the first of the builder’s merchants in the industry to offer an eCommerce platform with client specific pricing and integrated logistics.

 
In addition, companies which straddle the trade and consumer divide such as Screwfix are benefiting from the increasing consumerisation of B2B spending, with Screwfix in particular generating rapid growth from the successful combination of a mobile site and a click and collect proposition. 

 
In summary, although the UK construction industry has taken time to come to terms with the opportunities for cost reduction and efficient purchasing offered by the digital revolution, we are on the cusp of an exciting time where most major suppliers in the industry will be bringing to market an eCommerce proposition. The competitive landscape is changing fast, and the opportunities to make the construction industry more efficient and more effective are huge.

 


[1]Electronic Data Interchange – means of sending order directly between organisations.
[2]ONS states that this should be taken with a degree of caution, and could partly be explained as a consequence of sampling variability.