Australian wholesale distributors lag behind in E-commerce adoption

Research has found the Australian wholesale distribution sector is lagging behind in e-commerce adoption, with only 10 per cent of companies currently able to receive orders directly over the Internet.

The study, commissioned by NetSuite, shows that despite strong optimism about their prospects for growing the e-commerce channel, with almost 75 per cent of businesses viewing it as an opportunity, the study conducted by Frost & Sullivan has indicated just how unprepared wholesale businesses are to handle this growth.

“For wholesale businesses, e-commerce is both an opportunity and a challenge,” said Mark Dougan, managing director for Australia and New Zealand for Frost & Sullivan.

“It offers a way to build closer and more direct relationships with the end customer, the ultimate consumers of their products, but also presents both strategic and operational challenges. The strategic challenge largely lies in the risk of bypassing long-established distribution channels. Our research identified that the main operational challenge is in linking the e-commerce front-end to existing internal business systems.”

The sponsored survey of 102 Australian businesses in the manufacturing and wholesale distribution sectors was carried out by Frost & Sullivan in September 2013, to understand the importance of the Internet as a channel for their future business success.

It revealed that businesses in these sectors see the opportunities and benefits that e-commerce can offer, particularly convenience for customers, reduction in distribution costs and linking customer orders directly with central business systems.

While 76 per cent of respondents envisage that customers will increase online ordering over the next few years, ordering direct from their websites is much less common than in the retail sector, with most currently only receiving orders via e-mail.

However some businesses still identify a number of challenges that are keeping them from adopting e-commerce, including losing direct relationships with B2B customers, system integration issues and the feeling that they need to offer lower prices online.

According to Frost & Sullivan, while only a small percentage of B2C consumers are able to order directly from wholesalers and manufacturers online, more than 50 per cent of Australian manufacturing and wholesale businesses now place orders directly with suppliers online.

Over three-quarters of businesses expect to increase their online ordering from suppliers, citing quicker and easier ordering processes, access to a wider range of suppliers, less paperwork involved and lower prices than other channels as the top reasons.

Social media broadens communication channels with customers

The Frost & Sullivan study indicates that adoption of social media as a communication channel with customers is increasing, with 30 per cent of manufacturing and wholesale businesses now having a social media presence. Looking at manufacturing specifically, while take-up of social media is low compared to other sectors, it has doubled in the past three years to almost 15 per cent. For both sectors, however, telephone and e-mail remain the dominant communication channels.

“Social media is becoming an increasingly important platform for customer communication and engagement,” said Dougan.

“Businesses in the manufacturing and wholesale sectors are increasingly recognising the benefits of establishing direct communications with their end-consumers through social media.”

Integrated software platform overcomes challenges

According to the research, a major challenge faced by many Australian manufacturers and wholesale distributors with a web presence is a lack of integration between their web front-end and internal back-end systems, with less than 20 per cent having automated links.

Respondents cite a lack of integration as a major issue for exploiting e-commerce, followed by a lack of systems to service customers that cross between online and other channels, as well as a lack of systems that connect inventory to online sales channels.

Without a unified software solution, these businesses face difficulties in maintaining a consistent brand experience in areas such as customer support, pricing, as well as increased operational costs to run and maintain each channel.

“Manufacturers and wholesale distributors have, in general, been unfairly portrayed as having a fundamentally conservative approach; however, what we are now seeing is that thriving and successful businesses have embraced change and understand the generational shifts in process and technology they need to make to remain relevant, competitive and grow profitably,” said Mark Troselj, managing director of APAC and Japan for NetSuite.

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