For manufacturers new to e-commerce, fulfillment and shipping can be complex and costly.
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For manufacturers new to e-commerce, fulfillment and shipping can be complex and costly.
Middle market companies need to balance the allure of expanded reach with potential risks.
Data-driven inventory management and optimization functions can be an asset here.
In the wake of the transformative pandemic-driven shift to online shopping, an increasing number of manufacturers are choosing to showcase and sell their products through not just their own company websites but also third-party e-commerce giants. This thriving e-commerce landscape, where innovation meets opportunity, has led many manufacturers to embrace this digital frontier.
An estimated 60% of leading business-to-business (B2B) companies had either zero or limited e-commerce capabilities at the start of the pandemic, according to BCG Research. But within two years, the picture is the opposite: 53% of B2B companies—a category that includes wholesalers, retailers and manufacturers selling to other manufacturers—offered e-commerce capabilities in early 2021, and that figure climbed further to 65% in February 2022.
Such growth makes perfect sense; while the pandemic may have sparked this surge initially, there are numerous benefits to using e-commerce platforms that will provide value well into the future. Those benefits include:
The profound impact of these shifting dynamics has implications for virtually every sector, and manufacturing is no exception. As such, it is critical for manufacturers to have a resilient strategy that takes e-commerce into account. Many middle market manufacturers may need to reevaluate their strategies to keep up with these recent changes.
Mastering data analysis will be critical to allowing middle market manufacturers to adjust business strategies on time, ensure efficient fulfillment services and ultimately bolster margins.
While manufacturers increasingly embrace e-commerce for its advantages, including expanded reach and cost reduction, challenges abound. Security and privacy concerns, logistics complexities, and substantial technology and infrastructure investments pose hurdles in this fiercely competitive space. The cutthroat e-commerce environment necessitates meticulous attention to security and privacy concerns, with potential reputational and legal consequences for lapses.
For manufacturers new to e-commerce, managing supply chains, fulfillment and shipping is a complex and costly endeavor. Further, establishing a robust online presence requires significant technological investments, web development and digital marketing.
Some key questions manufacturing leadership teams should ask as they navigate these challenges include the following:
Mastering data analysis will also be critical to allowing companies to adjust business strategies on time, ensure efficient fulfillment services and ultimately bolster margins. Using vendor data, for instance, can help businesses analyze how pricing variability aligns with consumer behavior and harness that information to scale operations as needed.
Finally, one of the most important considerations is whether a manufacturer will want to develop its own e-commerce website or platform, and there’s also the option of offering products on a third-party platform. Relying solely on third-party platforms may compromise control over branding, customer experience and data. Overreliance on these platforms can also be costly; in the case of one leading e-commerce platform, up to 50% of individual sales went to the platform itself, according to 2022 Bloomberg data. The platform options are an especially important consideration for companies facing margin pressure. A balanced approach, combining third-party platforms with an independent e-commerce site, offers a strategic solution, allowing businesses to diversify sales channels and maintain control.
In the dynamic realm of e-commerce, we urge middle market manufacturers to recalibrate strategies for sustainable growth. Balancing the allure of expanded reach with the potential pitfalls of security risks and logistical complexities demands strategic foresight and a nuanced approach.
Companies setting out on this journey will want to clearly understand how using e-commerce platforms will affect operations more broadly. Key areas of consideration include:
As manufacturers evolve, learning from success stories in the e-commerce space can illuminate the path to a resilient, profitable and future-ready strategy. By carefully navigating the intricacies of the e-commerce landscape and leveraging data for efficiency gains, manufacturers can position themselves for success in this ever-evolving digital era.