While the COVID-19 pandemic temporarily stymied the success of brick-and-mortar businesses, retail is making a comeback.
As restrictions lift, consumers are getting back to shopping in person, with 47% of consumers reporting that having a local presence was a significant or very significant influence on which brands they chose to purchase from in 2021.
Retail’s relevance is underscored by the many ecommerce brands eager to break into the space, with just under half of brands planning to sell through retail or wholesale in 2022.
For B2B distributors and wholesalers, this is great news. However, as more and more players enter the B2B space, new complexities and challenges arise.
To stay ahead of the curve, B2B distributors will need to battle pure-play retailers and specialist companies, race to meet ever-evolving customer expectations, and navigate new technologies.
In this article, we will outline some of the challenges that B2B distributors face in 2022, provide some best practices to help navigate them, and detail how ShipBob’s B2B fulfillment suite can offer solutions to B2B companies.
What is B2B distribution?
B2B (or “business-to-business”) distribution is the process of selling and delivering goods to another business. B2B distribution involves one business procuring goods from a manufacturer or supplier, and then selling those goods to retailers, wholesalers, or different manufacturers.
In other words, B2B distribution doesn’t involve selling directly to the end consumers, but rather to other parties.
How does B2B distribution work?
B2B distribution begins when a B2B distributor (either a traditional wholesaler or an ecommerce company that sells through retail channels) purchases products from a manufacturer or supplier.
Businesses almost always order larger quantities of products than end customers do — so if B2B sales and distribution are a business’s focus, that business will probably order B2B products in bulk to make sure they have enough inventory.
Next, a retailer (such as Target or Walmart), wholesaler, or even a different manufacturer or supplier purchases products from the B2B distributor. The distributor is then responsible for packing and shipping the order to the retailer, wholesaler, or manufacturer.
From there, the retailer or wholesaler chooses what to do with the product. Most retailers and wholesalers will choose to resell the goods directly to end customers.
“Food Huggers started out as a wholesale business, and focused on creating a solid B2B business before shifting to DTC.
When we onboarded with ShipBob several years ago, they didn’t do as complex B2B fulfillment and shipping as they do now. When I spoke with ShipBob about their potential B2B roadmap and changes in the past, I was so happy to then hear that all of my suggestions were actually implemented!
ShipBob is going to continue to do incredibly well with B2B, especially having implemented feedback from real merchants and having made those changes and improvements.”
Juliana Brasil, Director of Operations at Food Huggers
Understanding the challenges facing B2B distributors
As the ecommerce industry, technology, and customer expectations continue to evolve, B2B distributors must navigate many unique challenges while running their business.
Competing against pure-play distributors
The rise of global ecommerce players such as Amazon, Alibaba, and eBay is one of the biggest challenges that B2B distributors have to overcome.
Like DTC businesses, B2B distributors may find it difficult to compete against pure-play distributors that have already achieved brand awareness on a global scale.
Many businesses automatically turn to those companies for procurement — and because they have enormous resources at their disposal and an expansive digital presence, it can be daunting for smaller B2B distributors to gain visibility with a target market.
Competing against specialized companies
B2B distributors must also compete with smaller specialized companies that are seeking to expand their coverage. By specializing in a specific industry or niche such as clothing, automotive parts, furniture, or even electronic goods, these companies can:
- Purchase larger quantities of a product, enabling them to fulfill larger B2B orders
- Secure bulk discounts in procurement and shipping, which can increase profit margins
- Use cost-savings to sell goods to B2B buyers at a lower rate
While there are also drawbacks to niche business models, these advantages can make it difficult for B2B distributors with wider product catalogs to win business.
Complex requirements and constraints for shipping
B2B buyers are just like DTC consumers when it comes to post-purchase expectations: no matter who or what entity is purchasing, the bar for sellers is always high.
As the B2C ecommerce landscape evolves to deliver highly optimized customer experiences, B2B buyers too have grown to expect a B2C-like experience even with their B2B purchases. This includes fast delivery (often within 2 days), order tracking capabilities, accurate orders, and round-the-clock customer service among many others.
Since B2B orders typically involve larger shipments and significant paperwork, it can be extremely difficult to deliver the kind of convenience and shipping speeds that B2B buyers expect from distributors.
Additionally, B2B distributors must accommodate buyer-specific requirements that usually vary from client to client. This may include making smaller shipments, shipping bulky items, providing real-time rates, achieving EDI compliance, and more.
Difficult to move to an online ecosystem
For traditional B2B distributors, transitioning into selling and communicating with customers online can be challenging.
Many traditional distributors still rely on telephone or email to make sales and accept orders. However, more and more often, B2B buyers are going online to websites to research, reach out to, and ultimately purchase from distributors.
If legacy distributors resist adopting new technologies, they risk:
- Missing opportunities to meet their target market where they shop
- Seeing fewer sales opportunities, which could reduce profitability
- Falling behind global B2B ecommerce players that are already dominating the online B2B distribution landscape
- Increased inefficiencies and errors from manual operations
Fortunately, logistics platforms like ShipBob can help traditional B2B distributors stay in touch, go online, and adapt to new technologies through user-friendly technology and easy onboarding.
Disintermediation of suppliers and consumers
Disintermediation occurs when a supplier decides to skip the distributor altogether, and sell directly to the retailer,wholesaler, or other consumer. Suppliers often choose this path because it allows them to increase their margins and gain access to customer data that can inform their manufacturing or procurement.
However, at times, disintermediation can also happen because the distributor isn’t efficiently meeting consumers’ needs. This leaves an opportunity for suppliers to remove the distributor from the supply chain and work directly with B2B buyers.
To avoid this, B2B distributors should make an effort to meet customer demand by utilizing the latest supply chain technology that can help them improve efficiency, fulfill and ship B2B orders quickly, and optimize inventory management to avoid stockouts.
How to solve B2B distribution challenges
Although B2B distributors face many challenges, implementing few best practices can go a long way towards successfully navigating them. Here are a few solutions that B2B distributors can use to optimize their operations and establish a competitive advantage.
Choose the best tech for your needs
A B2B distributor can tackle many of the challenges highlighted above simply by employing the right technology solutions.
If you are a traditional, pure-play B2B distributor without your own DTC ecommerce store, you will want to invest in:
- An Inventory Management System (or IMS) that can track your inventory in real time and help you replenish inventory in time to meet demand
- An Order Management System (or OMS) that can receive, confirm, and process B2B orders
- Automations that decrease manual errors from the fulfillment process while increasing efficiency
- Shipment tracking capabilities
- Software that tracks key metrics, KPIs, and data over time, which you can use to forecast demand more accurately and optimize sales
Ecommerce businesses that have multiple distribution and sales channels should also consider the tools listed above, but pay special attention to a software’s omnichannel capabilities. A platform that can synchronize inventory levels, order processing, and fulfillment across multiple channels streamlines your operations, and improves accuracy for both DTC and B2B orders.
Whatever distribution strategy you choose, you will almost always have to achieve EDI compliance to sell to major retailers. Electronic Data Interchange (or EDI) enables retailers to exchange documents and carry out transactions with their suppliers and vendors in a standard electronic format.
Many retailers will have unique EDI requirements that B2B distributors must follow, but partnering with a logistics service provider that has expertise in B2B can help you meet your retailer’s needs and reduce complexity.
“Learning to tailor our sales strategy, marketing, and packaging to each retailer’s requirements has been a challenge, but that’s where ShipBob really comes in handy. ShipBob is EDI-compliant with dozens of popular retailers, and their API integrations make it possible for them to fulfill orders according to each retailer’s compliance guidelines.”
Aaron Patterson, COO of The Adventure Challenge
Maintain supplier and customer relationships
Good rapport and trust between B2B distributors and their suppliers and customers can simplify many of the challenges of B2B sales.
Treat your suppliers as partners, and make every effort to earn their trust and loyalty. Show them that you’re a reliable customer by paying them on time or at least communicating any reason for payment delays.
Maintaining transparency is also crucial to maintaining a good relationship with both your suppliers and your customers. This includes transparent pricing info that accounts for shipping costs and any volume discounts that may be available, as well as transparent communication about delays, mistakes, or updates.
Build a seamless buying experience
B2B buyers appreciate seamless buying experiences just as much as DTC customers. While the added complexities of B2B can make it difficult for purchases to feel smooth, working to improve the journey from cart to delivery will delight customers and increase loyalty in your customer base.
To start, make sure your website is user-friendly, and that customers can easily access all the information they need about the products they want to buy. Consider automating customer communications and updates to make sure each customer feels like they’re constantly in the loop, and maintain a robust customer service program to troubleshoot and resolve issues quickly.
Partner with a B2B logistics platform
The right logistics partner will offer expertise in B2B fulfillment and distribution, help you achieve EDI compliance, and even optimize fulfillment and shipping speeds through automation.
Some logistics providers can even secure bulk shipping discounts with carriers on your behalf and store your inventory in strategic locations to reduce cost. With accurate orders arriving quickly and affordably, customers feel more satisfied, which in turn minimizes disintermediation.
How ShipBob is solving B2B distribution challenges
ShipBob’s B2B fulfillment suite offers distributors the software and expertise needed to meet the toughest challenges of the industry.
As a global omnifufillment platform, ShipBob can connect with major ecommerce platforms to help businesses process, fulfill, and ship B2B orders seamlessly by leveraging EDI integration, freight management, and retail dropshipping and distribution solutions.
ShipBob’s B2B fulfillment suite integrates with SPS Commerce to achieve EDI compliance with dozens of major retailers, improve accuracy and data exchange, and automate B2B fulfillment processes.
Whether you rely on retail distribution, retail dropshipping, or both, ShipBob’s solution fulfills orders on your behalf to save time, reduce costs, and increase efficiency. With ShipBob, you can manage DTC and B2B fulfillment through a single platform, and navigate unique retailer requirements with ease.
Managed freight services
ShipBob’s managed freight program works alongside Flexport’s Flow Direct LCL program to streamline their B2B supply chain. Through this partnership, B2B distributors can reduce lead times and access better visibility into freight coming from China. This helps you get products transported directly to ShipBob’s fulfillment centers, which helps you get orders to your B2B customers faster.
“The first shipment that we had with FreightBob…I mean, it was amazing. We beat the average freight time it’s taken to move something from Asia to our warehouse in LA by at least 50% — and it was easier and cost us less money. What’s not to love about that?”
Nathan Garrison, Co-Founder and CEO of Sharkbanz
B2B distribution FAQs
Here are answers to the top questions about B2B distribution.
What does B2B distribution mean?
B2B distribution is a distribution model in which a business sells and delivers products to another business, such as a retail store or a wholesaler.
What do B2B distributors do?
B2B distributors procure goods directly from the manufacturer or supplier, which they then sell to other businesses (typically retailers, wholesalers, and/or manufacturing companies).
What are the top B2B distribution companies?
Amazon, Alibaba, and eBay are some of the top B2B distribution companies in the world.