E-Commerce, led by Amazon, has disrupted retail and it has changed the way we buy everything from clothing to consumer electronics, to food.
But the vast majority of E-Commerce sales have always been B2C. That’s not to say that there aren’t billions of dollars in B2B E-Commerce sales each year, but those sales traditionally fall into a few limited categories:
- Wholesale products for retailers and resellers
- Surplus goods
- Consumables and commodities
- Highly-standardized parts and machinery
What do you not see successfully sold via B2B E-Commerce?
- Premium products
- Highly technical products
- New and unproven products
- Products requiring significant technical integration
- Products historically sold via mature sales channels
- Products requiring complex installation and value-added service
- Products that are difficult to ship and return
One might assume that we haven’t seen products with the above attributes thrive in B2B E-Commerce because they are not suited for it. That’s only partially true.
One reason B2B E-Commerce has not yet succeeded is channel conflict. This means that distribution channels, supply chain, and internal sales structures are often the first defense against the decision to pursue E-Commerce. We argue later in this blog that with properly executed E-Commerce and content marketing, traditional sales channels will benefit from E-Commerce. But historically, the opposite has been the popular school of thought—for good reason. Many B2B products are better with value-added service and expertise, the kind of which has been hard to come by on E-Commerce websites. And information asymmetry, where the seller knows a lot more than the buyer, is best mitigated by a knowledgeable and helpful sales team explaining features, benefits and technical specifications.
Content is Changing the Feasibility of B2B E-Commerce
Thus far, a financial KPI has supported the E-Commerce avoidance strategy and supported the notion that most B2B products are better sold through traditional channels—profit margins.
Amazon in particular, with its consumer-centricity, can limit margins on two fronts when not properly utilized—both in its cost structure and the way in which it encourages price-first shopping. Its collaborative filtering can align with competing substitutes or aftermarket parts and over time, margin compression is a reality for many sellers of premium products. This is augmented in B2B where buyers lack the personal impulse and interest in the products; aesthetic and style for example, are less of a driving force in the premium purchasing of B2B products.
However, the margin-compression seen with B2B E-Commerce should not be solely attributed to the format and function of Amazon and its competitors.
Let’s go back to the concept of information asymmetry. It is this dynamic that is to blame for decreasing margins, commoditization and increasing marketing costs often associated with sustainable B2B E-Commerce.
When sellers know much more than buyers about a product, or more specifically, when buyers don’t have enough information to understand why they should buy a product, how it will integrate with their current systems and fully understand its technical specifications, they undervalue the product. In a low information environment, all products begin to look the same, which is the definition of commoditization. Then, to make the best decision possible, buyers turn to the only concrete information they can use to compare products—price—thus driving pricing down over time.
E-Commerce isn’t the first environment where a lack of information (we’ll refer to information as content going forward) compresses margins. In offline sales channels, a lack of content has driven information asymmetry for eternity, driving up sales costs as people work hard to make up the difference. Fortunately, in traditional sales channels, brilliant sales people can somewhat efficiently make up for a lack of content with manual effort, and sustain sales volumes. They can ‘move product’. With E-Commerce, however, there is no highly motivated salesperson there to make up for a lack of content, and the failure to educate and motivate prospects becomes evident not in high sales costs, but in anemic sales volumes.
In evaluating the role of content and education in the success of offline sales and the failure of B2B E-Commerce, it becomes clear that margins are compressed and sales-efficiency slows when buyers don’t understand, appreciate and value your product’s premium differentiators. In offline sales, people solve this problem. So how can it be solved in E-Commerce?
Sales and marketing teams pursuing E-Commerce should consider entirely new content marketing paradigms.
Investment in product-explaining, feature-differentiating content should increase. Everything from animated concept explanations to 3D design illustration to customer testimonial video should be deployed with one goal in mind: to educate (and motivate) customers as to why your product should command a premium. You should answer every imaginable question through this content. Compatibility with other systems should be clearly defined and remaining questions should be easily answered through a service component in your customer relationship operation.
In considering how much content and of what quality content is ideal for your B2B products in an E-Commerce environment, there are few great examples to analyze. And don’t simply accept the standard page elements presented by E-Commerce sites, push for more! Demand that the shopping experience enables and promotes the consumption of your product-explaining content. Dry, dull, price-centric marketplaces devoid of content are unacceptable for sellers looking to command a premium for their B2B product, and every case study, whitepaper, video, animation, CAD drawing and more that you can deliver to the client will decrease the delta between how you feel about your product and how buyers feel about your product.
This helps you command premium pricing, increase sales-efficiency, lower variable marketing costs (through fixed marketing investments) and participate in the growth we will see in B2B E-Commerce. Simply put, the increase in content marketing will fuel the growth in profitable B2B E-Commerce by making it a more viable channel for premium products.
If content marketing is a solution for selling premium B2B products via E-Commerce, the first question is how much is ideal? A simple approach would be to invest the same amount in content marketing for E-Commerce that you would in the sales process. For many firms that would mean spending $25,000 for $100,000 in revenue. If you are not making that investment to gain sustainable B2B E-Commerce growth you must deliver unbelievably efficient and unusually successful content at a lower budget—which is possible, but unlikely to be a sustainable strategy.
The next question becomes ‘if we’re investing that much into E-Commerce, how do we spend our traditional sales budget; does this negate offline sales channels?’
Steve Jobs once said something along the lines of “Automation should not be used to save money, it should be used to increase quality”.
In this context, we must ask “How can sustainable B2B E-Commerce increase quality in sales, marketing and customer relationships?”
Presented in that way, the answer once again seems simple. If E-Commerce (and significant investments in engaging, efficient content marketing) can automate some of your customer acquisition, traditional sales resources can serve a greater role in the process. Firms that seek to replace traditional sales with E-Commerce will likely fail. Firms that leverage successful E-Commerce to gain new customers and give their sales teams the opportunity to add value in service, expertise, and incremental upselling of solutions will enjoy a new paradigm in sales efficiency. Sales costs are highest in the customer acquisition phase. Thus, companies overspend in the acquisition of new customers and underspend on customer retention.
By moving customer acquisition to a fixed-cost through content marketing and E-Commerce, firms can deploy sales teams to focus on customer retention, ultimately a more evolved form of sales.
Sales teams can invest time in solving increasingly complex challenges for customers acquired via E-Commerce channels, strengthening the customer relationship and ultimately driving sustainable, defensible product innovation that is customer-centric, highly valuable, and ultimately long-term profitable.
With a more efficient customer acquisition strategy and a sales budget repositioned to customer retention and relationship building, firms will gain a new level of efficiency and enjoy benefits ranging from improved client retention to lower sales turnover costs; in the end, sales teams should benefit through increased income as it becomes more viable to increase salaries and reward profit-driving (and protecting) sales efforts to existing customers.
B2B marketers looking to participate in the B2B E-Commerce revolution should build the most informational, descriptive and inspirational product pages they can. With more information, information-asymmetry will be drastically reduced, meaning your buyers will appreciate—and pay the premium—for your highly-differentiated products. In turn, this will improve the efficiency of your revenue operations and move traditional sales resource ‘upmarket’ to client-retention, problem solving and deliver more profit to the bottom line.