Asset-light e-marketplaces and other nontraditional shopping channels, combined with shifting demographics, are upending industrial distributors’ inventory-heavy model more rapidly than previously thought.
As a result, distributors must quickly adapt and address threats with everything from sharper mobile offerings to upgraded customer service, a new white paper from UPS shows.
According to the UPS Industrial Buying Dynamics Study: Buyers Raise the Bar for Suppliers, the biggest shift comes from millennials (defined for this study as those currently ages 21-34) who grew up in a digital era and are bringing their tech-savvy and nontraditional purchasing habits - for example, bypassing the middle man and working directly with the manufacturer - with them into the workplace.
The impact on the future of industrial products purchasing may be among the most profound of any modern generation of buyers and provide a glimpse of the future.
The report, the third such study compiled since 2013, captures a sector undergoing demand changes and channel shifts at a startling speed: 81 percent of buyers have purchased directly from manufacturers, up 64 percent from the 2015 report.
Read: The Five “New Rules” of e-Commerce Fulfillment
Meanwhile, 75 percent of buyers surveyed have shopped at an e-marketplace, soaring from just 20 percent in 2013.
What’s more, 80 percent of buyers are likely to shift to suppliers with a more user-friendly web presence, up from 72 percent two years ago.
“With e-commerce, industrial buyers can choose from numerous suppliers with the click of a button, leaving the traditional business-to-business distributor model threatened,” said Matthew Guffey, vice president of UPS segment marketing.
“Maintaining the status quo, even just for now, is not an effective solution. Distributors have to up their game.”
The paper identifies four main ways for distributors - including those with smaller ambitions or limited funds – to remain competitive and offers solutions to reach these young corporate buyers where and how they want to interact:
UPS and TNS conducted the survey of 1,500 buyers of industrial products who are between the ages of 21 and 70 in the United States.
Respondents purchased industrial parts, products or supplies in five product categories: equipment sold in a business-to-business transaction; final assembly OEM (original equipment manufacturer) parts; MRO (maintenance, repair and operations) parts; consumables/raw materials – input items used in a manufacturing process; and janitorial and sanitation.
Participants came from companies of all sizes, with roughly one-third reporting annual revenue of $1 million; one-third reporting between $1 million and $10 million; and one-third reporting more than $10 million.
Study Buying Policies
Buyers report being constrained in their purchasing roles. They may have to choose from a specific list of suppliers, or from a certain selection of products, as shown below.
Download the White Paper: UPS Industrial Buying Dynamics Study