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Many human scale businesses would like to augment their direct (business-to-consumer or B2C) marketing channels with complementary, indirect (business-to-business or B2B) channels—commonly known as wholesale distribution. The problem is wholesale can devolve into an order-processing hairball. Absent better alternatives, wholesale customers submit orders by phone, email, and even fax. Every relationship is unique. The resulting overhead can be prohibitively expensive. Roger Kirkness at Convictional wants to help automate B2B e-commerce to allow sellers to grow their wholesale channels profitably.
The functions of a marketing channel don't change. Choices regarding who plays which role, on the other hand, are constantly renegotiated as technology and relative market power evolve.
The term "market channel" describes the means by which your product is delivered to consumers at the right place and time and payments get back to you. Channel strategy comes down to determining who performs which related functions and at what cost.
Any channel—whether direct or indirect—must perform several essential functions:
- Marketing functions include gathering information about potential customers and using that information to segment the market and generate demand for your product. For example, brick-and-mortar retail stores and online drop-shippers primarily perform marketing functions.
- Logistical functions include storing, packaging, and transporting your product. Not surprisingly, third-party logistics (3PL) companies perform logistical functions.
- Transactional functions include processing the sale and negotiating who assumes the risks associated with ownership, fulfillment, payment, and product performance. Technology companies such as Convictional facilitate the sharing of inventory order-related information, which is a transactional function. Others in this category include payment processing companies.
These functions are continuously un-bundled and re-bundled in response to the market's needs.
Wholesale Portals are a Partial Solution
I met Roger when he was at Shopify Plus. There he played a key role in the launch of the e-commerce platform's wholesale portal solution. That's where a wholesale buyer logs into a seller's proprietary website in order to place, track, and, sometimes, pay for product orders.
During his experience at Shopify, Roger came to recognize that wholesale portals are only a partial solution. That is, they help automate the seller's order processing workflow but do so by pushing manual data entry onto buyers.
That's sustainable only if the seller has market power relative to buyers. For a growing number of aspiring, online B2B sellers, that simply isn't the case. In an environment characterized by peer-to-peer business relationships, the benefits of automation need to be shared by sellers and buyers alike.
Relative Market Power Drives Technology Choices
Per Roger, B2B technology choices are a function of the power dynamics among buyers and sellers.
- If you sell to wholesale customers who are a lot larger than you, they will most likely require you to use some variant of the electronic data interchange (EDI) protocol to share order information. When you sell to Walmart, Walmart sets the rules.
- If, on the other hand, you sell to boutique, brick-and-mortar stores, the least-bad solution might be a web portal. It's not yet practical for a seller to share information with a retailer's point-of-sale (POS) system. Buyers will still be faced with manual order entry, but a well-designed web portal beats the hell out of their keeping track of ad hoc emails with spreadsheet attachments.
- Finally, if you are selling to relatively small buyers who sell online, chances are they are using one of the leading e-commerce platforms such as Shopify, WooCommerce, or BigCommerce. In that case, the applications being developed by Convictional can allow for automated sharing of order and fulfillment information.
Convictional isn't trying to replace EDI across the board. Rather, it offers EDI-like automation for smaller users of modern e-commerce platforms who can't afford the complexity that EDI demands.
Nobody Likes Inventory
The problem is inventory. It takes up space, requires financing, and must be actively and precisely managed. That means every item needs to be entered into the inventory owner's accounting system.
Furthermore, inventory is expensive, which means it's risky. As Roger puts it,
No one in retail, whether large or small, really wants to hold onto inventory.
As logistics and fulfillment systems have become more robust and efficient, the responsibility for holding inventory has been pushed up the supply chain—often landing squarely in the lap of the manufacturer. Retailers—online or offline, large or small—prefer to be drop shippers. In other words, they want to take orders and have the distributor or manufacturer fulfill them.
Move Information Efficiently
Even if inventory no longer bounces around the planet from manufacturer to importer to distributor to retailer, information about orders must move from one party to the other if new forms of indirect distribution are to work.
- Phone and email are ubiquitous but inefficient.
- EDI has worked for decades but it's complex and expensive.
- Convictional is breaking trail to provide a new path for B2B sellers and their customers who utilize modern e-commerce platforms.
Globalization drives specialization. Profitable niches demand low overhead. Keeping overhead low mandates the intelligent use of automation. Convictional is focused on a leverage point—automated sharing of B2B transaction data. It's worth checking out.