TRANSCRIPT
Peter:
Hey everyone, Peter Crosby coming to you from the Digital Shelf Institutes Cape Cod office. I am joined today by Justin King. The DSI's B2B whisper at an undisclosed location in Baltimore where you disclose.
Justin:
It's, disclosed, disclosed. I'm in my office in Baltimore, at my solo office. So I'm still socially distanced because there's nobody else here.
Peter:
Before we get to B2B, just want to derive for those of you working in the DTC side of the house on September 17th at 11:00 AM Eastern, I'll be interviewing Byron Kerr he's run a DTC in e-commerce on both sides of the DTC isle, the scrappy and agile way at a digitally native bedding brand, Tuft and Needle. And then they got acquired by Serta. So now he's working inside of the former competition and global bedding giant sorta. So it's going to be a fascinating conversation about his experience with Kerr from both sides of DTC. And Annie will put the link in our show notes. So it's just a little, little plug there. And so Justin let's make the shift. Although many of the DTC brands are also B2B manufacturers. So there's a, it, this will serve a lot of our audience. What are you seeing among B2B manufacturers as we head towards the fall what's going on?
Justin:
Yeah. You know what, Peter, I'd love to talk about this report from McKinsey that came out with the report that really talks about the shift in B2B sales. So I think it's a great topic. Talk about, yeah. Before I do that, I just want to kind of make an observation. So, you know, since COVID started not much changed for me, at least in my work life. So I've been remote for about 12 years and I have a small solo office as I've indicated in my small town in Maryland. So I've continued to work in my office cause there's nobody else here, until this week. So my three youngest girls started high school virtually, but my wife is in private school. So she started in-person school. So I felt like the most responsible thing to do was to stay home with my kids and move my office back from my office to my home office. But the shift hasn't completely happened and all of a sudden now I'm, first of all, I'm the IT support dad, right? And my kid.
Peter:
And also the Dean of students, I would imagine.
Justin:
Dean of students, everything, right? I mean, they're good kids. They're doing their stuff. I just didn't want them to be by themselves. But listen, not being in my actual office has been incredibly tough. I mean, I've been remote for 12 years, but like I don't have all the stuff I normally do. I don't have my monitors yet. My printer, my microphone, and just like general internet connectivity. And that's how everybody else has felt during this whole time. They don't have their contacts, their phones or fax machines, their printers,
Peter:
Fax machines?
Justin:
Fax machines, believe it or not. The fax machines are still a primary way that B2B companies are communicating, or their orders are taken through fax machines. I actually, I was at a distributor. So before we were acquired by Salsify, a distributor gave me an office inside of their company after delivering a presentation to them. And my office was right next to a fax machine. The fax machine went all day long. I mean, you, that screeching sound like literally went all day long. Fax machines are still a part of this, right? So B2B companies they're really dealing with some interesting challenges during COVID. So I've talked to a bunch of CEOs and they all have, they've all told me, listen, one of the hardest things we've had to do is give people access to the ERP. When the ERP for most B2B companies is the backbone of the company. ERP is, most of the time they're on premise software, they're not cloud based or SAS. And so they've had to give VPN tunnels access to VPN tunnels to all their employees. And so just enabling employees during this time, I forget about sales and I'll B to B buyers want to buy, I mean, just enabling their employees during this time has been incredibly difficult. So really that kind of leads me to this report because this report really is measuring sentiment from BDB buyers and companies. So they measured the sentiment between April 1st and April 27th and all the major shifts that happened just in that four week period. I'm sure we'll provide the link to the report in the show notes as well. So one of the first statistics that has kind of stood out for me is that there's a 35% about how companies are interacting with customers. Meaning it used to be 54% of interactions with customers was traditional just inside sales, sales reps phone, and then only 46% digital. Now it's shifted to 37% traditional and 63% digital. A 35% shift. Yeah. I mean, in one month that shift happened. I mean, that's, that's an incredibly large shift. I mean, it makes sense, right? I mean, just what I just said, like everything now has to be at the fingertips of the laptop versus all the devices and things that we have. I mean, just phones, phones aren't as accessible right outside of our cell phones.
Justin:
The phones that we use in our office are no longer accessible. So this shift is kind of natural and makes sense, but it was really fast and we've seen an acceleration theshift. And when you talk to, you know, to, to brands that are actually experiencing this right now, are you hearing pain and fear or is there some measure of where this, you know, we're on a path here? What do you, what are you hearing from the street? So every conversation in April and May was just, it was pain, right? I don't know about Yerba pain pain, certainly just, just making this shift to remote workers was not, not natural for anyone. And then the shift for remote buyers. Wasn't natural for anyone. I think that's moved on now. I think everybody is prepared for this. They now know this could be, this could be in and out of this situation at any point in time. So I think they're well prepared for that, but on the buyer side, I think they're, they have both pain and fear. Like how buyers are interacting with them and the expectations that buyers. So it's an interesting statistic when I've talked to brand owners and distributors in that manner. They, they, they talk about eCommerce. So e-commerce may or may not be the statistic. And McKinsey said, there's a pretty significant shift in eCommerce. But even if a manufacturer distributor isn't seeing the shift in eCommerce transactions, they're seeing a massive shift in, in website traffic. Right? So, how they're placing the orders might be through a traditional venue. It could be right. It would make sense that some of these older buyers and to traditional business, but the research part of this has certainly shifted. Everybody's talking about at least double the website traffic during this small period of time.
Peter:
Wow. which again, makes sense, makes sense. Right. Stunning shift, particularly if your website's not ready for that.
Justin:
And that, that becomes the fear and the pain part for most companies. Right. So distributors are worried about, okay, do we have all of our products and the information about a product up on our website and manufacturers were worried about, do we have all the information to support that research and can they even find the products when they look on our website? So really a big shift, at least in looking at our websites and enabling the research and discovery phase for them. And then everybody's seeing an uptick in eCommerce, just some are seeing more drastically than others, if that makes any sense. Yeah, of course. Yeah. I mean, I'm sure it varies by category and by price point and things like that. Well, and so the next next point was interesting. I can't believe, I didn't think of this, Peter. I wish I would have thought of this first, but the next shift is that online chat becomes a primary driver in the sales process. Like, like practically speaking pragmatically, that makes so much sense because online chat is a natural bridge between traditional and digital sales, right? Because now you can have a person talking to another person, but just through a digital format instead of the phone. And I wish I would have, I wish I would have come up with that first, and predicted that. But they've shown that shift and by traditional and digital, I mean, traditional being researching suppliers by referral and customer referral and industry publications and print from suppliers. I mean, it makes sense that none of that's happening right now, right now, none of the personal connections are happening. I mean, I'm a well socialized introvert. So I don't mind this time of, of lack of personal interactions, but referrals and customers for all, those are typically based off of people having interactions most of the time, face to face, none of that's happening. So live chat has gone from 17% to 37% for small businesses. And they classify small businesses as anybody under a hundred million dollars. And enterprise has gone from 15 to 29%. So we're watching over a hundred percent increase in live chat expectations by B2B buyers and live chat usage by both manufacturing distributors.
Peter:
It makes sense, right? Because like you were saying, you were talking about referrals and things like the, the, the, the things you were talking about have to do with trust and confidence. Right. And a lot of that has been taken away. And the replacement of that makes sense would be, I need to confer even if not on the phone, but just need to ask my questions and get them answered and get me closer to saying, all right, this is an investment I can make on behalf of my company.
Justin:
These are complex products, right? I mean.
Peter:
Yeah.
Justin:
I mean, that's, that's, that's, you know, Luma, we all have, we talked about the differences between B2B and B to C most of the time in B2B. The difference when I talk about my B to B, I'm talking about industrial B to B, right? The differences, the complexity of the products. I mean, these are complex products that a mistake in buying the wrong product could be catastrophic for whoever's installing it, right? You get something at the wrong PSI, you get something at the wrong voltage. So these are complex products. So complex products normally means that you need an expert to help the customer walk through the complexity of that product, or have really good product information. So live chat is a natural just way of making that shift from traditional to digital.
Peter:
And I don't know about you, but as a consumer, at least I've been finding that, for example, we were buying blinds for our house, and I've been finding that you can wait on the phone for hours, sometimes waiting for a sales rep to talk to you, but you can go on live chat and get answers sometimes in, in minutes. So I think there's probably different teams enabled with some of those things, or maybe even different, completely different locations that that are, you know, maybe offshoring even where the chat can be done. Whereas that person might not be as, you know, as easy to talk to on the phone or something.
Justin:
Absolutely. Absolutely. Absolutely. Cause yeah, the, the, the location of the person doesn't matter as much the language, as long as it's typing, as being typed matters. So, yeah, I mean, I think this makes a lot of sense, but I mean, it brings, it brings up a good question, which is how many manufacturers and distributors actually have live chat enabled on the website. Right. So what I've heard from manufacturing distributors is that many of them are now putting this in place now, right. Not, not two months ago, but they didn't have it before they put it in place now, because it really is driving these digital sales interactions with their customers and any time a customer wants something. And frankly, it's, it's a much more scalable way of doing things, right. Versus talking on the phone, you can be, you can have two or three chat sessions going at the same time versus you can't have, right.
Peter:
Yes, yeah. It's efficient. Right. Right.
Justin:
So, you know, as we get into artificial intelligence and things like that, a lot of these chat interactions can be automated. There's portions of them that can be automated or at least suggestions to the person doing the chat can be automated, right. Where they can, as the person's asking a question, you could have suggestions on a screen saying, Hey, this is a possible answer for them and a link to send to the customer. And so this is a much more scalable way of manufacturers and distributors doing business with their customers for the long term. I, I think what surprised me a little bit too, was that where the biggest growth in e-commerce has been on the ordering side has been in mobile. So mobile, mobile orders are up well over 200%. And so that's the biggest driver. So website orders are up about two to 3%. When you look at the aggregate mobile orders are up 200%. And again, I just, I mean, it makes complete sense, right? People, people are now relegated to using their devices wherever they're at, and they are not going to pick up the phone and place a phone call like they would. So now they're using the mobile device to be able to purchase. But again, you go back to how many of these manufacturers and distributors actually have an experience that's good for mobile, right? Whether it's an app or just using their device. And I'm putting that out there for the just manufacturing distributors that are listening to say, you know, chat and mobile seem to be things that are here to stay from here on out. So you've got to put together a strategy to address both of those. And I'm sure you've seen that
Peter:
Shift. You know, you've been talking to manufacturers and distributors for years, and I know you've been a, you know, kind of a leading voice in those boardrooms and offices of this thing's coming. You better get on board. I mean, I'm sure you've been seeing a mind shift happening. Cause there's always those that are leading voices within, often the people that we talk to that are e-commerce, you know, digital upstarts within the organizations, then there are others that are dealing with the more traditional concerns of the business and are a little resistant to that. I'm sure you've seen those walls come down. I think
Justin:
I've seen him come down the most in the boardroom, right? Yeah. I think, for the most part, or in many cases, it's been lip service to eCommerce and digital versus now it's a boardroom, it's a boardroom strategy that's being put in place. I mean, according to McKinsey, 65% of B2B decision makers see this form of communication and digital as at least as effective or more effective than traditional, that's getting the, the, you know, the raised heads of all those in the boardroom to actually put something together.
Peter:
And what do you think is behind the word effective there? Do you have, do you have conjecture about that? Like what that means? Is it conversion rates? Is it a volume, is what it is?
Justin:
I think if we started on the customer side, I think you look at trust of, I didn't really trust that someone actually be there on chat or I didn't trust that when I place my mobile order, I'd actually go through now, when we're forced into this it's and you have it as successful order, or you have a successful chat session that then you've built that trust and that will then be duplicated the next time. Right. I think the trust starts with the customer. I think there's trust issues on the company side to say, I don't know if they actually place an order on our website, if we will actually figure it out, there's no order right. And actually get it out to the customer. I know you've talked about this on the podcast many times is we're watching a five year shift in digital transformation happening in five months, right. Six months. And certainly this is, this is just part.
Peter:
And do you think that's going to speed up the preferences?
Justin:
I do. I think, I think, I think kind of across the board, people have kind of realized, wow, like this actually works. Okay. I like doing it this way. Yeah. I like doing it this way. I did, I had a little court thing I had to go to and they did, they did all the court things. Oh, on zoom. I didn't have to go into the courthouse. And you know, my, my feedback after the session was like, listen, like all court sessions should be like this right. Where I don't have to leave my house. Right. And I think that with the same mentality in B2B of look, it works. Actually. I kind of enjoyed that more. I mean, if you think about the traditional branch setting of, of how orders are being taken, all right. So this is how, this is how the traditional kind of distributor model, at least between distributor and customer work, if I'm a plumber, um, you know, before I start my day around 6:00 AM I go to my local branch, I place my order at the, with the branch manager, the branch manager goes back in the warehouse and starts gathering my order for me. I get a call, I have coffee, I grab some donuts. And I talked to all my plumber friends that are all at the branch at the same time. That's how I start my day. Right. All of a sudden, now all branches are closed. It's only a pickup, right? So they have to get the place, your order ahead of time. Then come pick it up. I think in general, people are saying, I mean, that was pretty efficient. Owners are certainly saying that their guys are no longer sitting at the counter of a branch you know, talking with their friends, they're there, it's a much more efficient process. And I think it's here to stay. I mean, look, I think some things go back. Absolutely. But I think in general, people realize, Hey, this is, this is a good way of doing business. And by the way, from a customer perspective, if, if you're the one that's setting these expectations for your customers and you made it so easy to make the shift with you, do you think they're going to stay with you forever? I mean, do you think that loyalty has been solidified with that customer? Absolutely. I think that loyalty has been built. And if you've helped your customers through this process of making it easier, making the transition for their businesses, I think you've, you've built customer relationships with it for life. And that's what the traditional sales model was all about. Right. It was building these relationships and realizing you can do it.
Peter:
I remember a couple of years ago, I was speaking with a VP at a B2B manufacturer who had kind of forced his company to go through the exercise of evaluating all of their distributors, according to their digital fluency and strategy and, and kind of through sheer force of will got everyone, well, not everyone, but got enough people to agree that we're going to cut loose. The distributors that do not have, did not meet our standards for having a digital strategy, that's going to make them relevant in the future. And that kind of foresight I'm sure must be paying off for them now, but I'm imagining that kind of thought process might be happening at every manufacturer.
Justin:
I was just talking to a VP of eCommerce at a very, very large manufacturer. And he, we were literally having that exact conversation. It's like, we are going through the process of evaluating all of our distributors for their digital capabilities and that, that, that threshold, that bar of digital capabilities, isn't that isn't that big. It's not like they're saying you've got to be an A plus they're, they're evaluating to a C minus, right. They're so that they're not failing. And there are quite a few distributors that aren't, you know, making a Mark, you know, even with that low bar, that's been set and we had the same conversation and he said, you know, we are as a, as a boardroom because this is now a boardroom exercise as a boardroom. We're now realizing that this shift has to be permanent. And we've got to make our decisions about whales. We're making our investments in the partners that we have and the channel partners that we have based off of who we think is going to best serve the customer and all these different interactions. And digital is a big part of that. The future and I are super excited about that.
Peter:
Yeah. Yeah. I mean, those are incredibly painful internal conversations because think of the sales reps who in their territory might have a Mo you know, I don't know I'm making this up, but a majority of distributors they're falling in the failing category. That's a, now you're talking about somebody's livelihood at your company. I mean, it must cause just a ton of adjustment and difficult conversations.
Justin:
Well, yeah, but I also have seen it on the distributor side of it actually kicking them into gear for making changes like, Oh, you're serious, right. This is real. And if it's multiple manufacturers, I mean, you have to be a decent size manufacturer to be able to influence the distributor to make significant changes. Right. But those that are having an influence in that way. I think, I think to your point to Peter in the McKinsey report, I talked about how compensation for salespeople also shifted during this time where more salespeople were being bonused or commissioned on online orders as well, too, to make sure that the sales team was taken care of during this time. Right. So if you're a distributor, if you're a sales person, a distributor, one of your biggest concerns, and this is why you oppose e-commerce at every turn is that I'm not going to get comped on eCommerce orders. So they oppose it, right? Because it affects their livelihood. In this report, they talked about the shift of compensation going to incentivize that behavior of helping their customers get online to help the sales reps in the process. And they also indicated that that wasn't going to change anytime, anytime in the near future.
Peter:
Yeah. Incentives, sleep behavior who knew. Yeah. I mean, I was at Crate & Barrel a while back and was talking to an in store rep and trying to figure out some pieces of furniture. And I said, well, you know, maybe I'll just go and, you know, buy that online and take care of it that way. And he was not having it. He was just swaying me, he was clear that his compensation only comes if some, which is crazy, is likely to not have broken down that silo yet. And maybe since then they have, I don't know. But for me as a customer, it was a horrible experience because it said, sorry, you need to pick how you're gonna do this.
Justin:
I think I've said that I've said this before on this podcast, that salespeople are the biggest hurdle in a company's trajectory towards digital, or because they see their livelihood being affected. And frankly, some that are order takers should see their livelihood affected. Right. I mean, if you're just an order taker, you're not a true salesperson, adding value to your customers processes that I'd be scared to, but those true salespeople that are value, value oriented, and really giving value to their, their customers, they start, they're starting to see e-commerce as wait. E-commerce can just take my orders and I can just go and be a self person. Yeah. I don't have to be an order taker, pay a partner. Yeah. I think Peter, as you know, kind of wraps this up is you know, if I was a, if I was a manufacturer, you know, I'd be asking the question of what's my e-commerce digital strategy. We heard about chat and mobile, but I don't think it really means just your own website. I think, I think your website's important. I think a manufacturer's websites are important for discovery and for research, but e-commerce the transactions. Many of these interactions are happening in the channel. So how are you, what's your strategy for enabling your channel on eCommerce? It's a great question to ask your team and really asked the boardroom as well.
Peter:
And at the end, is the channel an unexpected list these days with Amazon becoming the world's search engine, like where do you need to show up? What is your channel, right?
Justin:
Is your channel, what's the channel capabilities? Do you know how e-commerce is affecting their digital is affecting the channels business, right. Have you had those conversations and then it's your job to make sure that your products are represented well in the channel, right? I mean you know, it's your job to make sure that your e-commerce, you know, experience is managed by you and I, I think every, every manufacturer has to come up with that strategy.
Peter:
Well, I'd like to thank McKinsey for their inspiration, Justin, you for your wisdom. So, as we said we'll make sure that our wisdom of Annie Shum who's our production assistant gets the show notes that links to the McKinsey report up in the show notes. And I think they tend to, they refresh it on a regular basis, right? So we should see some new numbers.
Justin:
I was hoping that was going to come out. The new August numbers would be out this week. I think the new August numbers will be out soon. So it will now I'll be able to compare April 1st to April 27 to the end of that.
Peter:
Well, maybe what we'll do is when that new version comes out, maybe we'll twist your arm to write a blog post sort of updating.
Justin:
Excellent.
Peter:
I think that'd be a lot of fun to sort of update these numbers. So Justin, thanks as always for joining from the disclosed location, good luck being Dean of students and head of IT at King university. It's really great as always to get your wisdom. Thank you.
Justin:
Thanks Peter.
Peter:
I would, I do want to plug for you because Justin, this kind of, these kinds of thoughts and ideas Justin is, is really sharing pretty regularly through your LinkedIn account.
Justin:
I am.
Peter:
So I can, I encourage people to connect with him there cause there's more to pick up. Thanks to you all as always for being part of our community.
