More and more traditional B2B companies are shifting from the traditional distribution structure and moving towards a B2C model, or in some cases a D2C (direct-to-consumer) model, at least in some areas of their business. In this episode, me, Anders and Stellan talked about this trend, and how B2B companies need to be prepared for the very different customer expectations it creates.
The B2C approach has worked well for a lot of B2B companies, especially during the disruption and digitalisation that the pandemic has brought. One classic example of a B2B-to-B2C shift would be an industrial manufacturing company that starts selling spare parts directly to end-users online. This appeals to customers, since they can go straight to the source when they need help. In return, the company gets much more control over its spare parts operation.
But like we spoke about in the episode, it also creates increased expectations. Your customers are used to Amazon-levels of service in their private lives, so they're going to expect similar things from you. That's why any D2C shift needs to be based on a genuine desire to improve your customers' experiences. It can't just be a PR move designed to show how modern and innovative your company is.
If you're considering experimenting with a B2C model, or if you're just interested to know about where this trend is heading, take a listen to our discussion. The podcast is available on Apple Podcasts, Spotify and Soundcloud, as well as a bunch of other platforms. You can also get the RSS feed link below. And as always, the video version and transcription are also available. Enjoy!
AE: [00:00:00] Lately, we have seen car manufacturers who have increased the direct-to-consumer relationship by example, launching car-sharing subscription models. Stellan, do you think we will see more B2B companies moving into the direct-to-consumer area?
SB: [00:00:25] Two parts of it - selling more directly in general, yes, I think so. Selling direct to consumers depends on what business you're in. So but if we move in the sort of consumer area, I definitely think so. I think a lot of brands have started to experiment with stuff like spare parts and things which sort of are, from a dealership network or reseller network perspective, perhaps more and more of a thing where they can say, "well, good if we don't have to handle that," but where there is sort of a high expectancy from the consumer to find those things. So I had an experience myself, for example, buying a freezer at IKEA, of course manufactured by Electrolux, and then things in it break. And you want to find a replacement and you find it directly from Electrolux. And then the thing is, you can't find it anywhere else. So it's if they hadn't provided it, you would simply have a broken freezer. So I think here is where gradually consumers will start to expect more of a direct relationship with the brand.
AE: [00:01:41] Do you agree Anders?
AB: [00:01:42] If I agree about Stellan's refrigerator? Generally speaking, I mean B2B companies have a very good possibility to sell more directly like as Stellan says. And then exactly like Stellan says, if it's consumers or not, doesn't matter. There are many manufacturing and industrial companies that sell indirectly in B2B to other companies that could start selling directly to other companies as long as they haven't lived in a sort of head office glasshouse where they know very little about how it is to be a real company or customer in a market. But definitely, with the examples you gave that B2B companies selling through resellers and retailers have a fantastic possibility to go directly to consumers, yes.
AE: [00:02:46] And do you think that we will see a major shift in this? And why will we see this major shift?
AB: [00:02:53] I don't have the intention to speak about certain brands today, but the challenge in many companies is that the older they are, the tougher it is to do this needed change or movement. And that goes both for B2B companies who sell to other companies and who want to sell more directly and indirectly. And that goes definitely for companies that have been selling through resellers, retailers and will now sell directly to consumers because as the words say, directly to consumer and to be a B2B seller is two totally different models. So it will be challenging for some. But if the possibility exists, yes, if it is recommended to do it, yes. But very important to be aware of the challenges.
AE: [00:03:54] And Anders, what do you consider are the challenges of selling direct to consumers?
AB: [00:04:02] Everything from how you measure success today, how you, the accessibility and the availability you need to provide in a B2B business versus direct to consumer business. The expectations on the consumers, what they compare with when it comes to distribution, knowing the status of logistics, knowing the price, knowing exactly everything, and generally speaking, the speed of all those things compared to the B2B business, that's just on top of my head as an answer. I don't know, Stellan, perhaps you have other things there.
SB: [00:04:42] Well, it's an ongoing shift. Of course, it's this notion that every product is a service waiting to happen. And so that is also one thing where sort of the needle is gradually shifted. So I don't pretend to be an expert, but I know, for example, that companies like SKF have moved from selling spare parts to instead selling uptime. So and I think we'll see more and more of that. And so a combination of selling direct and selling increasingly what's more like services than products. And then that makes you an integrated part of your buyer's sort of ecosystem in B2B, versus in B2C as a consumer, I'm the sort of end product, whereas in B2B I become an integral part of someone's factory or someone's logistics system or stuff like that, and that has much more demands connected to it like Anders was saying.
AB: [00:05:48] Alexander, this is going to be a short spin, but sometimes I can get worried that companies look at this as PR, meaning that they truly don't understand the huge differences in demands when you talk about private persons, when you talk about consumers. It's easy to say, but it's a different type of business.
AE: [00:06:16] Yeah. I remember in the summer, Anders, you shared a link to a lawnmower that you could subscribe to in order to get your grass cut, and you would get the robotic lawn mover and instead of buying and producing and selling the lawnmowers, they instead made it a service. I just saw that that website was down. So that was probably a PR, as you mentioned.
AB: [00:06:47] No, it can also be a very good intention where you do an experiment, you test a certain part of the market, I don't remember the brand, and if I would have remembered a brand, I wouldn't have mentioned it now, but it could have been an experiment. They were testing something, but also at the same time having respect for that's not how consumers have been keeping up with their lawns. So so it's a change where you need good examples. It's a change where you need someone in the community to say, "I can recommend this. This is fantastic. Do you want to be a part of this?" So you need to think through how this will be sort of distributed by the people using it. One thing is setting up something, throwing out an app saying "this is how easy you book this." But another thing is that, in the community where you live, let's say where Stellan lives, that suddenly a neighbour says, "aha, so it's a rental one?" "Yeah, you want to be a part of it?" I mean, we have seen good examples of when we changed music habits. It actually got distributed, the idea, through the users from the beginning. I said, "Stellan, shouldn't you also have this? This is great." I mean, you have to think through that they change habits as well, like in your example that you said I was sending a link to. But you have to think through more things than that.
AE: [00:08:20] Yeah. And Stellan, if you're a traditional B2B company that is considering moving into the direct to consumer area, what things do you consider, do you think?
SB: [00:08:34] I think we touched upon a lot of the aspects already, but above all, it's a strategic decision of where you want to go in your business. Essentially, going after consumers requires much more of a, you are targeting a larger audience with more marketing. So that requires a different set-up than a B2B environment, that takes effort, it's not just done overnight and then all of a sudden you are a successful player in both arenas. Then it's a much closer step, like Anders was talking about before as well, to move into selling direct in a B2B fashion. And many B2B companies are hybrids like that today already, where they operate directly in many markets and then they operate through partners in others and so on.
AE: [00:09:31] So, Anders, do you have anything to add?
AB: [00:09:35] Usually I do. And I was sitting thinking that people that listen to this, that know Zooma and know Stellan and me would be surprised if we don't go on a short Amazon track, so I will do. Amazon today, although most likely no one listening to this and no one that participates in this actually knows, but we have an example of an old school bookstore, although online, that today actually sells both to legal entities, so B2B, and sells for others and sells directly to consumers and the whole "shilavip", they do everything today. Maybe we should have a short spin about that Stellan, and maybe we should think about Alibaba as well. I don't know if you're a customer on Alibaba Stellan, but I am.
SB: [00:10:31] I buy stuff from AliExpress. So AliExpress is the consumer part of Alibaba. So it's the same, the same model basically as Amazon but operating under two different websites, different focus. So with both of them, it's interesting how much is a platform and how much is them operating directly in B2B and in B2C. So with Amazon, we know they have their own brands with Echo and Ring and so on. And then of course, a huge part is third-party sellers selling through the platform. I think it's like you said, it's in all directions happening at the same time. And so, yeah, it's definitely a quite uniquely large player that is very interesting to watch what's happening.
AB: [00:11:24] And in my case, that's actually one of the few examples where I am certain that I have a B2B and a B2C relation with a brand. I also know that others through that brand have a relation with me, although I'm certain that it's only Amazon who owns the data. But it's interesting to be both a B2B and a B2C customer of Amazon. They know what I expect. No matter if I step into a sort of, a company and suit, or stay private, I always know everything from all aspects. I never have any problems with returns or the status of deliveries or anything, but at least you in this meeting know, I'm sort of an Amazon fan. There are most likely negative things to say about them as well. But I'm a customer of them, mainly in UK and in Sweden. So Stellan, we're talking about B2B companies selling directly and indirectly. What can they learn from amazon when they do the shift, going not through resellers and directly to customers?
SB: [00:12:40] Well, it's a very broad question.
AB: [00:12:46] Narrow it down!
SB: [00:12:48] Yeah. So, top of mind I think what Amazon is really good at, at its core, essentially is logistics. And so there are many aspects of that, everything from how to predict what to have in stock, to how to handle the last mile of the delivery and all of that. And a lot of B2B companies in manufacturing are really good at that. So because of just-in-time deliveries for something to be fitted into another product that is going somewhere, has to arrive at a certain hour even, at the factory. But if you sort of move out of manufacturing, I think historically there has been more of a model of having like everything in stock for a very long time, and perhaps not having that kind of inventory management that Amazon has and so on. So now I'm sort of moving in a very sort of business development kind of direction. But it's, I think it's much more there that the challenges lie. And having talked to a few B2B companies as well, who are sort of experimenting with selling directly to consumers, the first kind of a number of hurdles you end up on is how to handle that in terms of the ordering process, the packaging process, the parcel delivery process, the returns process and all of that, because it doesn't fit into the normal flow of operations. And here Amazon is handling everything at the same time. So it's definitely their core competence, I would say.
AB: [00:14:32] Isn't it interesting, Alexander, that whatever you ask us about, we get back to Amazon?
AE: [00:14:39] Yeah. Do you have anything to add Anders, in the end here.
AB: [00:14:43] If this is the end, no.
AE: [00:14:45] OK, thank you very much for participating!
AB: [00:14:48] Thank you very much.
SB: [00:14:49] Thank you.