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Distributors ‘fall behind’ as consumers choose marketplaces

By Sasha Fedorenko June 11, 2019 - 5:31 pm

Distributors are “falling behind” as consumers choosing to purchase from online marketplaces and manufacturers, says new 2019 Industrial Buying Dynamics Research Report by UPS.

The study polled 1,503 buyers in the US between 22 and 70 years of age who purchase industrial parts, products, or supplies for use in 15 industries.

The transformation in the demographics of industrial buyers sees another shift is occurring.

According to the research, US shoppers continue to move their spending away from distributors to purchasing directly from manufacturers or online marketplaces. The increasing trend is forcing distributors to reshape their business models to stay in touch with the changing buying dynamics.

The report says that distributors lost seven points of purchase share to online marketplaces. That’s down from 45% in 2017 to 38% in 2019. On the other hand, online marketplaces increased share by 4%. That’s up from 24% to 28% on the same year-on-year (YoY) basis. Manufacturers gained three percentage points, from 31% to 34%, respectively.

Why the shift?

The analysis attributes the shifting buying behaviour to the changing age of the buyer. The rise of Millennials (born 1981-1994) ushers in a robust demographic that holds far less loyalty to the past. This youthful wave of buyers are tech-savvy, wants orders at speed, and often expects services such as post-purchase support that goes far beyond what’s expected in the traditional buying process.

Online marketplaces deliver the customer experience Millennials demand. They cite online marketplaces and manufacturers as excellent in value categories, driving their purchasing decision.

At the other end of the spectrum, Baby Boomers (born 1946-1964) continue to purchase overwhelmingly from distributors (46%). They spend the least of all survey age groups buying from online marketplaces or manufacturers.

Evolving perception of excellence

Consumers shift towards shopping on marketplaces is three-fold. First, the ease of placing an online order (42%). Second, the value for money (40%). Third, the ease of ordering with a mobile phone (34%).

Distributors still have strengths— but how are they leveraged?

This raises a question. How can distributors increase relevancy and secure mindshare among Millenial buyers?

  • Acknowledging that direct-from-manufacturer and online purchase volumes are likely to increase in the next 3-5 years.
  • Recognising the changing age of your buyer. Millennials are more likely to purchase from manufacturers and online marketplaces, while Boomers tend to purchase from distributors.
  • Understanding that there are evolving perceptions of excellence when it comes to your business. Manufacturers and online marketplaces are being associated with excellence and showing strong performance across consideration factors.
  • Acknowledging preferences based on product types. Sellers of specific product types offer built-in strengths for buyers.
  • Know the driving forces behind your customer’s purchase decisions. Baby Boomers emphasize price and value. Millennials emphasise customized products and post-sales support.
  • 3 months ago

    I believe the d2b and the d2c are 2 different tracks. The d2b market is shifting to a predictable course by purchasing departments searching for products and then having the ability to select best price and delivery options from just about anywhere in the world. The purchasing agent is looking for a similar method as the d2c process…ie search and compare, best price, select options and buy…with tracking and predictability which has become the norm for d2c and now expected and transfering to the d2b market. We have enabled the our global market platform to manage the entire process as well as the freight management and of course the Customs formalities http://www.eq8tor marketplace to provide the manufacturer or buyer a managed process including providing procurement and quality checks. One real benefit is that a corporate office with centralised purchasing can buy a product and then deliver direct to any location where the product is needed, rather than buy it, send it to the company dc, inventory and then reship to location required. We reduce the carbon footprint, eco-friendly efficient processing without the delays and extra costs involved.

  • 3 months ago

    As an Amazon FBA seller, with nearly a €1 million turnover, my biggest problem is finding stock at the right price. I’ve looked at distributors but apart from a couple of exceptions and then only for a small part of their product range, can I find anything possible to buy.

    I think the huge problem for distributors , is that they are squeezed in the middle between marketplace selling prices and manufacturer to distributor pricing. This seems to be made a lot worse for them because manufacturer’s are also now starting to open ‘outlets’ on eBay and Amazon.

    I wouldn’t like to be a wholesaler/distributor at the moment.

  • 3 months ago

    As an Amazon FBA seller, with nearly a €2.5 million turnover, my biggest problem is finding stock at the right price.

    Welcome to the world online selling, if it was that easy everybody would be doing it, all you would need to do is look at the Amazon sales list ring the distrubuter and they would be giving you prices that work instantly, including undercutting Amazon who’s retail arm makes no money , alas it’s more difficult then that.

    • 3 months ago

      I know- I’ve been doing it for 12 years! My point really was the difficult place that it seems to me distribuors are now finding themselves in and how that part of the retail chain urgently needs to think about how it can do business.

    • 3 months ago

      The retail arm probably does not need to make money, Amazon makes money. I do not use FBA but if I match Amazon on price I usually break even, but they still make their 15% from my sale.

      They are currently out of stock of some lines but still retain the Buy Box, they always claim the retail side to be “independent” so how come they get different rules?

  • 3 months ago

    It’s not that by that Amazon “probably” don’t need to make money, their retail arm unlike every other retailer in the world, doesn’t make any money the entire aim of Amazon retail is keep cost down on all products accross the site. On the products that they do make money on, they use this profit to cross-sudside losses on other products. They make money (bundles of it) from primarily from Advertising, and Selling Cloud Space (AWS), and taking a cut of everybodies lunch (sales commsions on 3rd party sales). Central to Amazon being successful is driving traffic to Amazon and keeping price low, hence why they make no money from retail (but in reality they really they do, from everything else assoicated with it).

    At the end of day it’s there platform and their rules which we all play by.

    • 3 months ago

      I am more than happy that it is Amazon’s platform, their rules and we should accept them and I have no problem with the dirty tricks they apply, we have the choice to walk away if we don’t like them. Having said that there is no reason to object to the unfairness of them.

      I do object to being told that Amazon retail is nothing to do with Amazon marketplace and that they are just another retailer like any other, which is completely untrue.

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