How to diversify your B2B digital sales channels part 1

By Roland Benedetti, SVP Strategy, Ibexa

B2B businesses have never had so many ways to reach their customers. This is an opportunity but also a danger because how do you leverage the right channels for your business model, and do this without taking sales away from the more traditional routes to market that have worked well in the past?

The diversity of sales models is in itself not a new phenomenon. Before the digital revolution, businesses already had to steer a course between direct sales and a legion of indirect “channels” such as distributors, resellers, affiliate partners, agents, value-added resellers, wholesalers, retailers and more.

This all got a lot more complex as the digitalization of business introduced new communication channels, usually referred to as “digital channels”: websites, email, apps, social networks and kiosks. The graphic below illustrates the change:

How can B2B companies negotiate the opportunity and overcome the bewilderment of these new choices? We shall explore the answers to this question in two articles. In Part I, we look at the (perceived) risk of destabilizing existing sales channels and analyse what mix of sales channels might be optimal in which circumstances. Part II puts branding center stage and outlines what first steps you could take towards innovating your go-to-market approach. Spoiler alert: it cannot be achieved in one go or with a single project.

Dealing with the risk of cannibalizing an existing sales channel

Whenever a company chooses two routes to its customers, it will be confronted with either the risk of channel conflict, or of cannibalization of one channel for another. Every channel is to some extent only addressing a segment of the whole market, but the risk of conflict and cannibalization becomes obvious when two channels overlap as shown below.

A great pre-digital example of a conflicting overlap is Renault. Since 1898, the French car maker has owned a distribution channel (Renault Retail Group or RRG) and which it operates in parallel to a network of franchised car dealers. For the end customer, it’s hard to tell the difference. There is clearly a conflict between the two channels, to the point where RRG, which is not profitable, is now closing some of its traditional points of sale and transforming RRG by investing more in its digital presence and reducing direct conflict with its traditional reseller networks.

It doesn’t have to be this way; the multiplicity of sales channels can reap dividends. A textbook example of this is Hummel, the Danish sports clothing brand. It started its digital transformation with a strong focus on brand and having control of its brand in its respective channels. It introduced a consolidated e-commerce approach, both via B2B and B2C channels. But when one might think that the opening of direct routes to customers (D2C) could hurt its channel resellers, be they online or physical stores, it’s actually the contrary. One of the results of its transformation was a successful increase of e-commerce volumes, and perhaps surprisingly more on the B2B side than on the B2C, suggesting that more than cannibalizing an existing channel, the brand increased its reach and its conversion thanks to a controlled multi-channel sales strategy.

For every business, the added value vs possible damage question for opening a new digital sales channel is different. So in what ways can we frame the discussion?

What's the ideal mix, and which channels are relevant for your business?

Broadly speaking the digital revolution introduced three new options for B2B businesses:

· Direct digital commerce is when you operate your own e-commerce channel to reach your end customer, whether it is a consumer (then D2C), a business (we’d then speak of D2B for direct to business), a governmental organization or others. You are creating a direct connection to the final buyer of your product thanks to digital commerce.

· Existing B2B marketplace is an external sales channel where a third-party player (the marketplace operator) connects you (as well are your competitors) to your customers and acts an agent or middleman facilitating the sale.

· Digital commerce via online reseller is another type of go-to-market where you don’t disrupt the value channel but count on your distributor or resellers (or on new distributors or resellers) to sell to their customers online. In this approach, your focus is on selling to your reseller/ distributor, but also on providing digital tools to help them sell the end-customers (mini-sites, e-retailing, find-a-reseller tools and so on).

The above list shows strong differences as well as some clear complementary overlaps.

We believe that for many businesses, these three channels are more complementary to each other than being exclusive of one another. Even when there’s overlap between a direct online sale and an e-commerce sale through an online reseller, these channels are by no means exclusive of one another, as long as there is transparency about the relationship with the reseller(s).

In fact, all channels seem to be capable of bringing value and are good candidates for your sales channel mix. There are many possible routes that can be explored, considered and built, but there’s also the risk of trying to do everything at the same time, which is not viable. Depending on your case, you will want to build a digitalization roadmap, not to explore and win all sales channels at the same time.

In our next post, we look at the central role played by digital branding in diversifying sales channels and discuss how you could get started with implementing such a strategy. If you would like to get in touch in the meantime or speak to an expert, contact us at info@ibexa.co