Why 2015 is the year for B2B, Home & Garden and Food & Beverage in eCommerce

Lately we’ve been noticing some interesting changes within the world of eCommerce which has paved way for a new era of industry players which include: B2B, Home & Garden, and Food & Beverage. Traditionally, these have been industries that have complex business processes or needs, and didn’t necessarily “fit” an online business model. However, with access to new/better technology, lower barriers to entry, changing consumer expectations and an evolving eCommerce world, we’re seeing a shift occur with new and exciting products being available to buy online.

The content of this post was adapted from a two part webinar on eCommerce Trends for 2015 we did alongside our friends at Tenzing. The post is broken up into three parts highlighting three industries and sectors we think will be at the forefront of eCommerce this year.

Part 1: Business to Business (B2B)

For years eCommerce has been directed at B2C businesses. Now however, after substantial shifts in buyer behaviour the industry is changing. eCommerce is now becoming a levelled playing field between B2C and B2B. This is presenting some immense opportunities for B2B businesses and making way for a new age of hybrid companies. B2B is now the fastest growing segment in eCommerce as brands and manufacturers go direct to consumer. But every brand and vertical are all struggling with it (ie. issue of Channel Conflict). In this section, learn how B2B eCommerce differs from B2C and how B2B merchants can compete within the B2C eCommerce world.

Part 2: Home and Garden

We’ve also seen a recent push with Home and Garden businesses (ie. home decor, furniture etc) into eCommerce. Home & Garden is an interesting industry with which more complex logistical issues surrounding fulfillment and delivery due to the size of the items. We’ll be sharing what we’ve learned so far from the few retailers that are online.

Part 3: Food and Beverage

This year we’re going to see Food & Beverage companies as well as Grocery make a bigger push into eCommerce. Obviously, Grocery has been available for years (ie. Grocery Gateway), but now we’re seeing a lot more niche players hit the market, thanks to lower barriers to entry in the eCommerce world. What will this mean for the industry, what complexities and challenges involved when delivering perishables? We have some thoughts around this.

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eCommerce in 2015:  B2B, Home & Garden, Food & Beverage 





Business to Business (B2B)


warehouse_b2b

B2B is not a new concept

When looking at eCommerce trends for 2015, the first one that stands out for us is how B2B businesses (Business to Business) are continuing to play a larger and more aggressive role in the eCommerce and digital world. It’s not a new concept, there have been some early successes and struggles – but as the eCommerce industry changes, adapts, and evolves, these types of businesses are seeing potential to do the same. We’re living in a world where 10-15 years ago things were very different (business, strategy etc), and everyone is noticing. Why is this an important trend to watch for? It’s not because it’s new, as it’s not. It’s because it’s not an exception anymore, it’s becoming a rule. B2B companies everywhere are doing it, or at least considering it and talking about it. If they’re not, they should be. 

How are B2B companies doing it?

eCommerce is no longer just B2C

Traditionally, B2B businesses have a few different options when getting more involved in the digital space. Whenever we’ve talked about eCommerce and B2B at the same time, the mentality has always been them going directly to their business consumers. The truth is, when people talk about eCommerce today, their immediate thought is to go to B2C. However B2B companies have had the ability to add eCommerce to their existing business and they’ve created order booking systems, digital systems, and overall CRM tools that help to digitally communicate with their clients about invoice management and overall account status. A very important fact about online B2B business is incorporating the sales rep business model to a company’s digital environment, allowing the sales rep access to portals and tools, thus still making it a very strong sales channel. 

b2b_b2b2c_chart

The trend that is taking over right now is that B2B companies are starting to create digital strategies and going directly to a business where there is a known engagement with customers, which we call B2B2C, or going directly to consumers themselves. B2B companies are recognizing that there is a lot of great potential going direct to consumer. Not just for increasing the revenue opportunity but also increasing their brand presence online. Combining these efforts, building sites and portals for both B2B customers and B2C customers to shop can happen, and having it happen in the same environment is a big thing. With the technological ability to offer a personalized experience, a B2B business can offer their customers custom pricing rules, product offers and purchase options and even payment forms. With systems and software making this process very doable it’s becoming too easy not to consider doing this.

Why Go Direct to Consumer?

Better Margins

It’s simple in that, B2B can sell items at wholesale prices, or take the massive volume potential of the digital world and sell the same items at retail prices. Margins are much more favourable in that industry. It’s the same reason many brands have been opening up retail stores of their own. For many retailers this business model has too much margin potential to ignore.

Brands, manufacturers and wholesalers have their own pricing rules and promotion guidelines, but going directly to the consumer has allowed them to set the retail bar. At the end of the day it’s a good way to impact activity in the market, and drive market prices. Customers trust the brand, and whether you buy directly from a brand or not, consumers still have a perception that all the rules are driven by that brand. This is a major driver as to why B2B businesses are going direct to consumer. 

Tighter Control Over the Customer

One of the bigger reasons to go direct to consumer is that businesses have a tighter control over the full experience of their brand. In the book the Thank You Economy, there is an idea about how businesses and customers should be interacting and communicating with one another. Two generations ago businesses were all about relationships, you knew the person who you were buying from at the local store, they knew you, your kids etc. All of that was a big part of the retail and selling experience, but we’ve moved away from that. Now we have big retail, big businesses, and globalization. However, social media has brought back direct communication between a business and its customers. You can literally speak directly with Nike through Twitter, or post directly to Loblaws on Facebook. Now, you can talk to a brand that you’re buying from. The relationship exists. 

B2B businesses, primarily brand manufacturers, are building a strong relationship with their end users. Their brand image is shared, talked about and retweeted etc. We’ve all seen a viral video that has been built by a brand. Activities like this help build that relationship with the end consumer. Brand images are shared and talked about, the information that these companies are getting back from their customers is priceless. 

The ability for B2B companies to build their own relationship with the end user is becoming more powerful ever year. This relationship building has turned into brand loyalty, and thus turned into a business relationship where transactions are taking place. What’s happening now is not because companies are seeing the potential, but because their customers are asking for it!  

Increased Competition

The truth is, we hate it. We hate that business decisions get made, sometimes primarily on competitive analyses. You do need to do a competitive analysis and be aware of what’s going on, but we want to help B2B companies recognize the potential of going digital and what other companies are doing.  It’s not something that just some are doing, it’s something that everyone is doing. Customer relationships are up for grabs now, and if you want permanent residence in your customers evoked sets, you need to be very much involved in this industry and a big part of this trend. When customers  think about a particular product, you need your brand and name to come up first, just to stay competitive. There is so much information and communication out there that you need to stay top of mind. We’re not saying copy and paste what your competition is doing, but it’s important to recognize what impact your competition is having on the industry. Keeping an eye on what they’re doing while still focusing on your business, your message, your model and your data. It’s an undeniable part of full analysis and planning.

Retail Shelf Space is Shrinking

As the retail industry changes, shelf space is shrinking down. Show rooming is becoming more common, Omni-Channel strategies are sweeping the “nation” (aka world). Wholesale customers are not buying the large percentage of the catalogue that they use to. They themselves have more systems in place to make better buying decisions. The ability for a B2B firm to come in and control the product offering, to offer it through the online channel for the customer to manage themselves, is incredibly powerful. The ability to control their brand image, marketing knowledge, and the overall purchase abilities for their end users, is too significant to avoid. Developing a strong B2C strategy helps to take advantage of this. 

Data Gold Mine

B2B companies all have the same needs and desires to collect as much data on their end users as possible. Think about all the business decisions around marketing or merchandising or overall brand messaging that are based on the people who are actually purchasing and using your product. Having the direct relationship with your consumer allows you to benefit from acquiring the data directly. The lifetime value of your end user is yours to track, to own and build off of. Not only do you learn about their buying habits but their shopping, browsing, engagement and email habits as well. We live in a world of data, and decisions cannot be made without it. If you can drive your business growth on simple fact, you’d be crazy not to. If we could provide you with all the insight of how your user engages with your brand, especially including purchase habits, would you take it? We wouldn’t even be able to get through the question without you jumping up and say yes. 

B2B and eCommerce: Why Now?

1. It’s never been easier

Why is this a strong trend right now? First, it’s never been easier to have products made and designed at scale. Niche product designers and brand are popping up each day, fuelled by manufacturers overseas and 3D printing. The technology to support this kind of initiative has never been easier to acquire. There are multiple platforms and tools that do all the different things we’ve been talking about. With technology this readily available, it’s just too easy. Lastly, the communication is pretty much effortless. Everyone and their sister is on social media numerous times a day. Companies don’t have to try that hard, as long as they have the tools in place to build a relationship with their customers. 

2. Stronger push for merchants to be vertical (manufacture own product)

Because of this “easier” world, Retailers are actually manufacturing their own product. It’s adding more logic around supporting the direct to consumer trend as a whole. Buying directly from merchants who manufacture their own products is just becoming more common. There are multiple wholesalers and manufacturers that have a direct customer relationship, one example is Bench.ca. If you were to ask a sample of customers if they were a manufacturer. retailer, wholesaler or a brand, they would likely have no idea. There is a difference, but the lines are getting blurred. This is the key, businesses have all of these opportunities to engage in all these different channels. 

3. Lower TCO to technology

Alongside it being easier to acquire software and technology it’s also becoming cheaper. In some cases software can be free! Magento, the world’s most commonly used eCommerce platform, has one of the strongest market shares and a free version of their platform which many merchants utilize to springboard or build their eCommerce business. That’s just one example! The availability is there, there’s never been a better time to get started. 

4. Keep up with new market players

As bigger brands are going the route of smaller SaaS offerings, they are seeing newer guys scale quickly, so it’s important to stay competitive to keep up with market players. 

Challenges with B2B

Channel Conflict

As a B2B business getting into the B2C space, there can be some challenges. The first one, and the one we hear the most often is Channel Conflict. It’s by far the biggest concern and the first thing merchants discuss with us when we start talking about B2B2C. There are very few B2B companies, if any at the start, that make the direct to consumer strategy, their main strategy. It’s a great opportunity, but they still have a business to run. There are many benefits to wholesale businesses if they have a direct relationship to the end user but initially, and understandably, wholesale customers of the brand or manufacturer don’t see that right away. When adding channels to any business, it’s important to pay close attention to how they impact each other, and in many cases, at the high level. It’s almost as if you’re going into competition with your wholesale customers, so you need to pay very serious attention to that. 

Understanding Local Customers

It’s also important to understand local customers. Having a direct relationship with your end user also involves understanding the social and demographic habits that they come from as well. It’s critical to recognize that most B2B companies have a broad understanding of the market, but they don’t have it at the local level. This filters into data collection as well. Up until the decision to go to direct to consumer, data collection usually isn’t as granular as you want it to be. There are a lot of B2B companies that have found the challenge of penetrating more local markets to be a serious set back to the kick-off of the strategy. 

Lack of Backend Systems

Another big challenge is a lack of back end systems. While technology is available and cost efficient, there is still a migration of IT that needs to be considered. Companies don’t always have the logistical or back end support to look after a direct to consumer business. Legacy software may not always play nice with new technologies, and internal processes or personnel may need to be changed or evolved to allow for a seamless integration of a new business model. While there’s a lot of benefit and opportunity, the internal processes and systems need to be considered and accounted for. 

Consumer Demand Planning

Other internal processes that would need to be considered are: how you are going to market to and plan for this new type of customer? It’s a much different logic and planning for B2C than for B2B and often outside consultants can be a huge benefit. We talk about big data opportunities, but if you need to start from somewhere you’re going to need some help and guidance to do it. The brand message does have to stay relatively similar, but having the same plan for a B2B customer base and a B2C customer base, really just wouldn’t work. It’s a big challenge. 

IT Planning

Any lack of back end system support requires a lot of thought but beyond the overall system purchasing and planning, it needs to have a completely different outlook. Keep in mind, you’re in essence opening a new division of your business. Therefore how you plan your infrastructure is very different. There are systems that you might not have needed much before, but you will need now, for example: an eCommerce system, proper front end analytics system, warehouse management systems etc. These are all systems that you’re going to need to consider if you’re going the direct to consumer route. 

Building Customer Experience

Front end user experience, conversion optimization, analytics tracking and overall A/B testing, are all new concepts that, if you haven’t been in the B2C or direct to consumer world before, you probably haven’t focused too much time on it. They don’t have much existence in B2B, but to build that strong customer relationship you need to be aware of the user experience that is going to do it for you. It’s a new trade to learn, not one that you can just jump into it and ride the wave without planning or accommodating. If not taken seriously, it could present many challenges.

Home & Garden


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Home and Garden is one of those industries that is making a big play into eCommerce lately. Both B2B2C and B2C companies in this industry are recognizing and seeing the potential for online business, and they’re going at it full force. This is in part due to the ability to collect data on their customers. The fact that CRM data is becoming the norm is driving a lot of the decisions. Knowing who your customers are and building a relationship with them, is key. Yes, there are challenges in this industry and best practices that need to be considered, but the opportunity that the eCommerce space offers, can’t be ignored. 

Examples: Umbra and ELTE

Two clients of Demac Media are Umbra and ELTE. Umbra is a homeware design company and ELTE is a home furnishings retailer.

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Umbra
Umbra has both B2B and B2C components. It has businesses who buy from it directly, and they have an online experience. But they recognize their brand strength and the ability they have with their end user, so they have built a strong business to consumer experience. They’re relatively new to eCommerce, and recognize the power of B2C, but knowing the strength of their B2B, allowed them to go into that multi-channel direction. 

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ELTE
ELTE is new to eCommerce as well, but has a great history in business, and considered best in class. It’s a 4th generation family-owned business in home decor, and one of the biggest stores in Canada right now. One of their challenges is to connect customers with their sales team. A big part of their brand experience is each customers’ relationship with their sales rep, particularly because it is rare that purchases are made during the first interaction. Connecting the sales team to their online portal and allowing them to book appointments in advance of going into the store was a necessary addition to components like front-end user experience, tracking and overall conversion. 

The B2B Component

Something else to consider for these two businesses is the large portion of their online businesses that cater to other businesses. With Home & Decor there are designers and decorators who do a lot of the buying, it’s big portion of their business. It is important to recognize that the customer in your store or on your site is not necessarily the end user. A lot of the strategy and thought process in this particular industry goes into that concept, because very often the purchase decisions requires guidance and help.

elte_umbra_screenshots

The big advantage of eCommerce for these companies is another opportunity for product showcasing, overall education and marketing. In an industry that is so very visually driven, and in a world with big screen monitors and on the go web browsing, it’s important that these brands and products can be showcased in a way that doesn’t diminish who they are. 

It’s an industry where content around your product is extremely important, which needs to be accounted for in the design and user experience. Big images, product driven content, and product comparison really helps build a strong purchase path, and helps with overall conversion optimization. 

Food & Beverage


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The Food and Beverage industry is a $7.6 trillion dollar industry globally. In Canada alone, we spend more than $8,000 a year, just on food and beverage, with 70% of that happening in traditional stores. In 1997 the US became the first country in the world where shoppers could order food online. Then in 1999, Grocery Gateway was launched in Canada. Almost 20 years later, when you look at food and beverage sales, less than 1% of the industries sales take place online.

While food and beverage first appeared online in the US and North America, it’s now lagging in terms of adoption. In Germany, Australia and Switzerland, the food e-share is expected to reach 10% by 2020, but globally, the leader in this area is South Korea where about 80% of shoppers buy their groceries online. 

What do consumers want?

In terms of what customers are looking for, and the advantages of purchasing food and beverage online, they’re really shopping for three reasons: 

  1. Convenience
  2. Variety
  3. Price

The convenience of home delivery is a great advantage for consumers. It means getting home quick from work, one less errand to run, something that customers truly value. As well as convenience, customers frequently look online for specialty food and beverage items.

While convenience and variety are important, it should come as no surprise that price is the biggest reason customers are shopping for food and beverage online. Customers will (and do) hunt online for the best price options, even for their groceries.

Opportunities Galore

There are several opportunities for Food and Beverage merchants entering into eCommerce. You can add value through their online channels with content like recipes, calendars, and fresh food advice. There are also opportunities for increased cross selling products. The amount of data you can collect gives you the opportunity to offer specialized products including specialty items that you may not want taking up valuable retail shelf space. It can also give you the opportunity to offer them items that are more in line with their digital footprint and what they’ve purchased historically. 

Challenges with Food & Beverage

Delivery, Temperature, and Cleanliness

There are of course challenges to selling food and beverage online, some of which are similar to general retail but others are unique to food and beverage. Obstacles include: delivery (how do you get the product to the customer?), temperature constraints (if you have a cold delivery, how does it keep cold?), and cleanliness (do your customers feel confident in your processes and how you handle the food and beverage?). Consumers are concerned about timely and convenient delivery, and the integrity of the cold delivery model. Logistically, the demands are high. You’re not just delivering a sweater to a customer. If you’re delivering meat, or something that requires a certain temperature, you’re complicating the delivery process. Not only that, customers want it the same day. They want it quickly, without having to purchase something in advance. Gone are the days where consumers go into stores and make these huge purchases for their groceries each week. Now, consumer go into grocery stores more frequently buying smaller amounts of food. Will your service align with your customers’ wants and needs?

Price

Price, is very critical. Because delivery is so expensive it can be difficult to make profit in a fairly low margin industry. Offline food shoppers are very price sensitive and converting them to cross channel shopping will be difficult if it increases cost. Vendors need to provide attractive pricing that is consistent across all channels so they can draw customers into their market.

Product Quality

There are also concerns about product quality. Customers want to pick, choose, smell, taste and feel their food, to ensure they get what they’re looking for. Consumer confidence is always important, but even more so in the case of food. Offline retailers already have that trust because consumers can see the product readily, they can squeeze and even taste the product in stores. You lose that opportunity when you move to an online store.

Why now?

Same Day Delivery Is Becoming The Norm

Consumers are already used to buying from Amazon, and with the advent of Amazon Fresh, it’s quite an easy cross over. Amazon has also expanded their same day delivery, to make it more convenient to shop online. This means that consumers could go into work, purchase their groceries online, and then have them show up at their door in the afternoon without them ever having to stop at a store. 25% of millennials actually say that they would pay a premium for same day delivery and with Amazon at the forefront, same day delivery is becoming the norm within the industry.

Increased Investment

Food and Beverage is becoming a very popular sector for tech investment. The size of the market and the number of segments it crosses provide a lot of opportunity for innovation including fresh meal delivery services, recipe apps, look and cook options etc. The tech industry is taking notice, sitting up and following closely.

Examples of Food & Beverage companies

Loblaws

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Loblaws is piloting a store in the Toronto area, that mimicks a popular European model, click and collect. This means customers purchase items online and and pick it up from a window, dropbox or desk at the store. This model addresses the industry’s main challenges: price, is protected with a minimal fee for the service (between $3-5) and logistics as well as delivery aren’t really concerns because product quality is maintained in the store, and you don’t have the logistical challenges of delivery. While startups might be looking to innovate in niche markets, Loblaws is leveraging what it already has in place, to create a cross channel experience for customers

Goodness Me!

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Another great example is Goodness Me, a family owned and operated business, that has about 10 stores in Southern Ontario. Similar to Whole Foods, they sell health and wellness focused food and grocery items. What’s neat about Goodness Me is their focus on education. They offer for courses and classes to educate their customers, allowing their customers to learn about food and make more confident purchases. The online element of their business has allowed them to expand that. Items on their site are even built with a concept of “good”, “better” and “best”, allowing customers to easily compare products before purchase. Goodness Me recognizes that every consumer is different and how they’re educated on food and product is very valuable to them. They have truly mastered education, content and commerce. 

B2B, Home & Garden and Food & Beverage: reshaping eCommerce possibilities

There you have it. Three industries that will be shaking up the eCommerce game in 2015 and beyond. We’re excited to see more of these companies enter the eCommerce space not only from a user experience perspective but also how it will help to reshape our buying behaviours both online and offline. If you’re interested in reading this post in an ebook format please click on the button below to download a copy of your own, completely free.





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