Distributors are “falling behind” as consumers choosing to purchase from online marketplaces and manufacturers, says new 2019 Industrial Buying Dynamics Research Report by UPS.
The study polled 1,503 buyers in the US between 22 and 70 years of age who purchase industrial parts, products, or supplies for use in 15 industries.
The transformation in the demographics of industrial buyers sees another shift is occurring.
According to the research, US shoppers continue to move their spending away from distributors to purchasing directly from manufacturers or online marketplaces. The increasing trend is forcing distributors to reshape their business models to stay in touch with the changing buying dynamics.
The report says that distributors lost seven points of purchase share to online marketplaces. That’s down from 45% in 2017 to 38% in 2019. On the other hand, online marketplaces increased share by 4%. That’s up from 24% to 28% on the same year-on-year (YoY) basis. Manufacturers gained three percentage points, from 31% to 34%, respectively.
Why the shift?
The analysis attributes the shifting buying behaviour to the changing age of the buyer. The rise of Millennials (born 1981-1994) ushers in a robust demographic that holds far less loyalty to the past. This youthful wave of buyers are tech-savvy, wants orders at speed, and often expects services such as post-purchase support that goes far beyond what’s expected in the traditional buying process.
Online marketplaces deliver the customer experience Millennials demand. They cite online marketplaces and manufacturers as excellent in value categories, driving their purchasing decision.
At the other end of the spectrum, Baby Boomers (born 1946-1964) continue to purchase overwhelmingly from distributors (46%). They spend the least of all survey age groups buying from online marketplaces or manufacturers.
Evolving perception of excellence
Consumers shift towards shopping on marketplaces is three-fold. First, the ease of placing an online order (42%). Second, the value for money (40%). Third, the ease of ordering with a mobile phone (34%).
Distributors still have strengths— but how are they leveraged?
This raises a question. How can distributors increase relevancy and secure mindshare among Millenial buyers?
- Acknowledging that direct-from-manufacturer and online purchase volumes are likely to increase in the next 3-5 years.
- Recognising the changing age of your buyer. Millennials are more likely to purchase from manufacturers and online marketplaces, while Boomers tend to purchase from distributors.
- Understanding that there are evolving perceptions of excellence when it comes to your business. Manufacturers and online marketplaces are being associated with excellence and showing strong performance across consideration factors.
- Acknowledging preferences based on product types. Sellers of specific product types offer built-in strengths for buyers.
- Know the driving forces behind your customer’s purchase decisions. Baby Boomers emphasize price and value. Millennials emphasise customized products and post-sales support.