Stefanie Naujoks (Research Director, Manufacturing Insights Europe)

Throughout the two-decade history of digital commerce, most of the investments — and the media attention — have been focused on B2C retail and consumer use cases. In the coming five years, however, IDC expects the fastest growth and innovation to occur on the B2B side of the market. In a recent study (B2B Digital Commerce in Industrial Manufacturing: Maturity, Investment Drivers, Trends and Challenges) IDC looks at the different maturity levels of digital sales channels in the industrial manufacturing industry, the investment drivers (from EDI increasingly becoming a bottleneck to the transformation of business models from product centric to services centric), and the common pitfalls on a project level and how to overcome them. This blog post is a summary of our key takeaways.

Digital Transformation of B2B Sales Channels Is Not Just Driven by COVID

Digital commerce only represents a small part of the overall sales effort among industrial B2B manufacturing organisations. Those manufacturers that are more mature when it comes to digital sales channels are the ones from technology-orientated value chains, such as manufacturers of electronic components and high-tech equipment, and those that have more engineering-orientated value chains, such as manufacturers of agricultural equipment and vehicles, construction and mining equipment, and industrial tools and machinery.

With COVID closing physical sales channels (such as trade fairs and showrooms) and social distancing concepts making in-person customer visits impossible, many industrial manufacturers have had to rethink their traditional physical, in-person sales channels towards digital sales channels.

But COVID isn’t the only challenge, and the top 5 investment drivers for B2B digital commerce in the industrial manufacturing industry are as follows:

  1. EDI becoming a bottleneck: For many manufacturers, EDI, which still plays a major role in placing orders, is increasingly becoming a bottleneck. Manufacturers are looking at ways to leverage new digital technologies for improved customer engagements and create more opportunities to upsell and cross sell.
  2. Enabling new service-centric business models: Industrial manufacturing organisations are looking to new revenue streams and the transformation of business models from product centric to services centric. Data-driven services for connected products in particular will also require sales channels to be digitally transformed.
  3. Digitally enabled product showcasing: Increasingly mature digital technologies such as AR, VR and digital twins enable industrial manufacturers to showcase their products virtually without having to attend costly trade fairs. This will also drive investments in digital sales channels.
  4. Consumerisation of industrial products: B2B buyers — like B2C buyers — increasingly expect Amazon-like ease of purchasing experiences. This not only includes purchasing products, but also making it easier to buy spare parts.
  5. Alignment of heterogenous digital sales channels: Many industrial B2B manufacturers have selectively built up digital sales channels in recent years. Many B2B digital commerce sites, for example, have been created for specific product lines or only for spare parts. Manufacturers also provide dedicated web portals for sales partners or distributor networks. It’s also common for manufacturers to have B2B commerce applications in place for select regions. This drives investments in a more comprehensive digital commerce strategy that aligns and consolidates various digital commerce technologies, people and processes.

Major Trends for B2B Digital Commerce in Industrial Manufacturing Revolve Around Data, Analytics, AI, Automation and B2B2C Enablement

Most B2B digital commerce investments by industrial manufacturers relate to core commerce capabilities such as customer registration and profiles, product catalogue management, site search and navigation, shopping cart, self-service customer services, pricing and discount management, configuration, quoting or order management.

IDC survey results show that for 23% of manufacturing organisations worldwide, investments in customer experience programmes are a top priority over the next two years. The average across industries is only 17%. Investments include digital commerce and contact centres. Although the survey results cover manufacturing organisations in total, IDC expects investments by industrial manufacturers in B2B commerce solutions to increase.

Top B2B digital commerce investment trends include:

  • Digital B2B omni-channel alignment
  • Data analytics to improve internal sales efficiency
  • AI-powered self-service customer portals to improve customer experience
  • Automation of B2B sales processes and workflows
  • Enabling the B2B2C dealer and distributor networks

B2B Digital Commerce Is a Growing Market in Industrial Manufacturing, But on a Project Level There Are Some Common Pitfalls to Watch Out For

Industrial manufacturing organisations have told us that major challenges often relate to an underestimated complexity of projects. For some clients, a pure B2B commerce implementation project might work, but for the majority, more areas are involved (such as back-end integration), requiring a rethinking of existing business models. The less this is discussed with the clients upfront, the more it prolongs project sales cycles or complicates project alignment during the implementation phase.

Also, projects with industrial manufacturers are typically multiregion projects, which makes it even more complex: different regions, different pricing strategies, etc.

Other challenges relate to the lack of people and customer readiness. For some industrial manufacturers it’s difficult to identify capable project owners who can not only connect all relevant internal stakeholders but also implement agile project management approaches (which digital commerce or digital customer experience projects typically are). The customers of industrial manufacturers are also a challenge, as they are often reluctant to change and need to be integrated into the change process and transitioned towards new digital sales channels.

Helping industrial manufacturing organisations to manage these pitfalls and help them implement B2B digital commerce solutions is a major business opportunity for IT service providers. Given the current low levels of overall digital sales maturity among industrial manufacturing organisations worldwide, those IT service providers will be well positioned to help their industrial manufacturing clients take an approach that starts small but that can scale fast globally.

Watch out for our upcoming IDC MarketScape Worldwide B2B Commerce Services for Industrial Manufacturing 2021 (September 2021), which will evaluate the capabilities of key IT service providers to advise on appropriate B2B commerce strategies to help their industrial manufacturing clients implement the right B2B digital commerce solutions.

The IDC European Manufacturing Executive Digital Summit 2021, on November 18, will provide a great opportunity for manufacturing executives to discuss this and other key issues related to how best to respond to changing market conditions and customer requirements and how to establish transparent and responsive operations leveraging digital technologies.

 

For more information, please contact Stefanie Naujoks or head over to https://www.idc.com/eu.

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