Posted in Digital Commerce, Digital Transformation
October 26, 2022
Offsetting distributor overhead costs for manufacturers
Inflation. Possible recession. Supply chain delays. Changing buyer expectations. There is no shortage of pressure on manufacturers.
This article focuses on one area manufacturing companies need to resolve: offsetting the cost of selling their product through a distributor or distribution network.
What does it take to offset the cost of distributors in manufacturing?
Every organization is keeping an eye on expenses now. Coming out of some of the toughest economic times globally since the early 2000s, manufacturers, in particular, are being extra cautious. The bottom line is getting more attention than ever, and companies want to know how to offset costs and improve profit margins. Let’s look at just a few ways the right digital commerce architecture can help organizations on both fronts.
Improve systems integrations to remove redundancies and trim labour costs
Often, long-standing organizations have many systems and platforms that make up their business. They need all of these programs to run their business, but frequently, those programs don’t connect to each other. Uncoordinated technology investments and poor systems integrations lead employees to spend extra time moving and manipulating data.
30% of employees feel that more than half of their work consists of manual and repetitive tasks that distract them from value-added work.
Spend time on business process automation, not just production automation
To combat redundancy and trim labour costs, integrate data from your sales, production and fulfillment systems. Tightening these systems and data will eliminate swivel chair processes and digital friction. Reducing these items will free up labour you can allocate to more profitable areas of your business, such as lead generation or increasing production.
Adopting new technologies does not have to result in lost productivity. The important thing to consider when investing in tech solutions that support legacy systems is whether or not the solution is truly adding practical value to your business ecosystem. Consider how integrations and business automation can work together to make things faster and more streamlined. If adding new technology to your stack doesn't reduce workload, reconsider its value.
Consulting with experts in workflow automation, legacy integrations, and data management is a sure step to ensure you are adopting the right technology for your business.
Optimize and improve sales processes
The new buying behaviour for manufacturing clients is moving away from traditional face-to-face sales. Digital-first research options are no longer a nice-to-have feature; they are the only way to hold on to your customers. B2B buyers are demanding digital and self-serve options from their vendors, and the companies who don’t have those options will start losing market share if they haven’t already.
Without adding digital-first research, requesting a quote capability, and purchase and reordering options, manufacturers will lose market share to companies that cater to the up-and-coming digital-native buyers.
Shape digital offerings to support your traditional sales process
When we say “digital offerings,” it does not mean changing your business model to digital products. We mean that you need to create a way for your customers to access your sales flow without talking to anyone. That could be an ecommerce site, a product catalogue portal, or even a simple reorder function built into your website. Each serves a purpose: taking a manual task out of your sales team's hands, giving them time to track down new leads or improve customer relations.
Improve profit margins by adding a B2C sales model
The pricing model many manufacturers use for distributors (direct or 3rd-party) gives deep discounts for volume purchasing. Those deep discounts represent a hit to the profit margin. What if you took back some of that discount with a direct-to-consumer approach for part of your product line?
Maybe, just maybe, consider a B2C sales channel
Changing business models completely is a scary proposition for many longstanding manufacturers. But what if you could go direct to the consumer with just a portion of your product line? For instance, replacement parts.
By not building D2C sales for your entire product line all at once, you can recoup some of the overhead costs of distributorships and improve profit margins overall.
Creating your own B2B and B2C digital commerce platform is not the easiest solution. It may require outside resources and considerable investment, but it offers many advantages.
Increased profits. You will be able to get your full MSRP rather than wholesale prices for your products.
- Faster time-to-market. Rapidly prototype, test, and push products to market. Development speed gives you a distinct competitive advantage.
- Brand control. Talking directly to the end consumer, you eliminate the risk of your brand being diluted or misrepresented by third parties.
- Price control. Manufacturers can reinforce their MSRP and control when and how their products get discounted.
- Better customer data. Selling directly to consumers allows you to collect unique and specific customer data that can ultimately result in better products, stronger relationships, and increased sales.
How Acro Commerce can help
Manufacturers can reduce costs and improve profit margins by adding systems integrations, optimizing and improving sales processes and selling direct-to-consumer for at least part of their product line.
If you are a manufacturer and ready to start talking about adopting B2C commerce solutions or streamlining your digital operations, our team can help. We can help you figure out how to adapt your current tech architecture, optimize workflows and automate processes where possible. Finally, we can help your organization develop and adopt a B2C ecommerce strategy that works for your business.