Today’s supply chain issues around availability and logistics have highlighted the restrictions of the traditional wholesale model, according to an industry-wide survey of the UK’s leading foodservice wholesale businesses. More than 73% of UK wholesalers have identified eCommerce development and transformation as the most strategically important area for their business, said the survey by French e-commerce software company Mirakl and Foodservice Online in association with the Federation of Wholesale Distributors.
The survey asked the UK’s leading foodservice wholesalers about the role of eCommerce in their business to examine whether the sector is ready to embrace digital transformation and the online marketplace model. Marc Teulières, EVP, Customer Success B2B at Mirakl and James Bielby, Chief Executive, FWD tell Wholesale Manager why foodservice wholesalers should consider a customer-centric marketplace that meets, or exceeds, customer expectation, offering choice, value, convenience and speed.
Do foodservice wholesalers believe there is an increase in demand from foodservice buyers for online services?
James: There was quite a clear finding in the report from the work that was undertaken. Almost all the wholesalers who were involved in the work said demand for online services from foodservice buyers is increasing. It is almost universally believed that is the case and finding a response to that is really important.
Do foodservice wholesalers worry they are getting left behind if their competitors have a strong online presence?
James: It was something like 85% of the wholesalers surveyed thought they would be disadvantaged in terms of their business if they were competing with people who had a better, stronger online presence. It’s clearly a really important aspect of the offer. While there are some operators who have done a really good job, there are also those who are not as advanced in that journey. They are looking to invest in digital and a lot of investment has gone in already. In the last couple of years we have been dealing with all sorts of external challenges. As we move into a more stable trading period, this is the time to invest.
Are foodservice wholesalers now at the point where they want to operate their own ecommerce marketplace?
James: Yes, that was something that came out in the research. There is an educational element to it. Some of the people involved in the survey wouldn’t necessarily know what an e-commerce marketplace is. Those who are cognisant of it are saying yes, it is something that absolutely is something they are looking to invest in and operate. If their competitor businesses have got that offer then it’s clearly in their interest to have something similar.
Was Covid a turning point where foodservice had to become more digital?
James: Yes, I think so. The journey had begun previously to Covid but it was a point at which they escalated that. Some businesses pivoted during Covid from business-to-business to business-to-consumer operations because a lot of the outlets the foodservice wholesalers were supplying weren’t open or they were open in an extremely limited way. The wholesalers then were selling products to consumers. They had to adjust their business and create an offer that was appropriate for consumers. We helped them with that and we signposted that by some work we did with Foodservice Online to help people at home during lockdown find wholesalers that were selling to consumers. That was a useful and helpful thing to do. What we have seen since the various lockdowns have come to an end is that demand has gone up sharply. We are still not where we were versus this time in 2019. Those businesses that were reopening were clearly looking at getting back to trading and getting people back through the doors so online became really important. The adjustments that were made for the business-to-consumer operations were really helpful in terms of looking at digital strategy and e-commerce functionality. It was easier than it had previously been. The other aspect is there was time. If your customer base disappeared you then had time to look and think more strategically rather than dealing with day to day operations. Clearly they were trying to stay in business but beyond that there was perhaps headspace to think about these things in a more strategic way.
Marc: Metro France is a client of ours. During the height of the pandemic in France, one of the most sold products was electric motorbikes. This was because during the height of the pandemic, restaurants were in desperate need of motorbikes to be able to do home deliveries to their clients. Metro were wondering do they need to buy motorbikes to stock alongside their carrots and potatoes in their warehouses. No, that makes no sense. So they identified a vendor of electric motorbikes, onboarded those guys on their marketplace and it sold like crazy. This illustrates the power of the marketplace because they were able to fulfil an urgent need of customers without taking the inventory risk. Covid has shown to food and beverage clients, to restaurants, that parts of their needs could be fulfilled digitally. They did not need to go to a wholesaler in person or be visited by a rep for any purchase they had to make. They can gain time.
Also, Covid stretched supply chains to limits that were unknown before. Those who had a marketplace already saw it helped them have a more resilient supply chain. When you are out of stock in a category, it’s much more agile when you have a marketplace to onboard a third party vendor who has the same products. It is something that is complementary to your core operations and helps increase the resilience of the supply chain.
In France there was a change in regulations and restaurants had to change their defibrillators. Some of our clients, instead of buying defibrillators and stocking them, they offered restaurants through the marketplace, vendors of defibrillators. It’s another example of something that fulfils a short term need in a very agile way.
Did some wholesalers lose out during the pandemic because they weren’t up to speed with ecommerce at that time?
Marc: Our clients are those that have the ecommerce marketplace. We had some clients whose marketplace projects were a bit stuck. At the beginning of the pandemic they were focusing on short term operations. But after that they accelerated projects that had been sleeping for some time.
James: Opportunites have been missed because wholesalers didn’t have an ecommerce offer. As businesses returned, they found habits have changed and it is now expected for them to have that decent ecommerce offer. People in business use digital purchasing platforms for their own personal usage. They have an expectation of a similar standard and ease of use on the B2B side. That is not necessarily replicated everywhere. There are some really good examples. But I think there are lots of opportunities for wholesalers to get better at that.
Have customers’ expectations been raised because they are now used to ordering from Amazon?
James: Yes, certainly some wholesalers need to catch up. Thinking about the foodservice operators, the outlets and the way they order products, they absolutely have an expectation of a certain quality from the platform from which they are ordering. That is not a new thing. That has been around for as long as people have been shopping digitally, but it has really escalated over the last 10 years or so. It’s not a new point but it is something that still needs to be addressed in some areas.
Marc: In all sectors you have short players who disrupt wholeslers and create a digital experience that fulfils the needs of their clients. I lead Mirakl’s B2B customer success team so I see a lot of B2B businesses and in particular wholesalers in the food and beverage sector and other sectors. There is in food and beverage, in the aerospace industry, in automotive and in hospitality, a battle for who is going to be the industry’s one stop shop. Customers face a paradox. On the one hand they typically want less suppliers because for administrative reasons it’s easier to have less suppliers. On the other hand, they want more offers, more products. They have more micro-segmented needs. In the restaurant industry you have vegan restaurants and you have people who want to source very local products. There is a proliferation of needs while there is a willingness to reduce the number of suppliers they deal with. The marketplace concept is a way to solve that paradox.
What percentage of wholesalers do you think will expand their digital offering over the next five years?
James: in the research it was 77% that used their online offering to differentiate themselves against their competitor set. That presupposes that would include an expansion. That is a pretty high number. It is going to be a primary focus for them in terms of their offer and their differentiation against their competitors.
Marc: In the B2C world half the total ecommerce transactions are flowing through marketplaces. Marketplaces is half the total global ecommerce in B2C. In B2B it’s more like 10% at this stage but it’s growing at a very rapid pace, at a minimum of 35% per annum. If you look at absolute value it’s already significant and it’s growing very fast.
What will be the benefit to customers of wholesalers increasing their digital offering?
Marc: If you put yourself in the shoes of a grocer or a restaurant, the advantages of a digital offering are more choice and simplicity – the ease of purchasing, the concept of a one stop shop. For wholesalers there are multiple advantages of having a marketplace. One is it’s an easier way to enter new categories, to offer new products like a defibrillator or an electric motorbike. Secondly, it’s a way to reduce inventory exposure. It’s a way to enter new categories without having the inventory risk. It is also a way to reduce out of stocks. Last year we had a client in Europe around February or March who was starting to supply restaurants with terrace equipment like tables and chairs. There were out of stocks which was a big problem because they had a couple of months to sell the equipment and then it’s gone. They were able to onboard vendors of terrace equipment and to fulfil the need of their clients. They used the marketplace technology not to enter a new market but to fill a supply shortage they had on their core offering.
It is also a defensive move. Digitalisation will happen. There will be in every industry challengers who try to become the one stop shop. There is a race to know who will become the one stop shop. You had better start early.
Although wholesalers understand the need for become more digital, are they actually taking action in this area?
Marc: Yes, they are.
James: Yes, I think the aspiration is there, absolutely. That is pretty clear from the research. As a strategy, yes that is entirely something they are looking at. Tactically, no, I think there is a long way to go on the journey. The number of businesses that have somebody within the workforce who is dedicated to ecommerce is really low. In terms of plans to execute a strategy in that space, I think it was 31% of those surveyed who had nothing in place or they were still thinking about it. So it’s an aspiration, it’s definitely something people want to do but they have not necessarily embarked on it yet to the extent they need to or that others have.
How many wholesalers have an ecommerce team in their business?
James: I think it is 6%.
What are the benefits to wholesalers of offering an online marketplace?
Marc: It helps wholesalers be more agile, having a more agile supply chain. It helps you enter new categories or new products in a more agile way because you don’t take the inventory risk. It also reduces out of stocks. You can complement your offering with the offering of third party vendors. If you happen to be out of stock in your warehouse, you can fill it with the offer from someone else. You cannot bet that for the next 10 years your client will remain offline forever. It will happen. If you are betting on the way of purchasing to stay the same for 10 years, I am ready to bet that you are wrong.
One of our clients in Europe doesn’t oppose the marketplace in their core business. Both businesses serve each other. For instance, they had suppliers who had been begging them for years to sell them more products. You are not taking my full portfolio. Now with the marketplace they have a new channel to help their suppliers sell their full range without taking the inventory risk. Now with the marketplace procurement, on the slow movers in the warehouse, they can take them out of their core offering and move them to a marketplace. On the opposite side, what they see when marketplace products are selling very well, they can consider putting them in their warehouse, in their core offering because they believe they can make more business out of it. These are not two parallel businesses. This is something that can complement each other and feed each other.
What are your top tips to wholesalers in becoming an online marketplace?
Marc: Firstly, you need to start from the customer. Are there any particular pain points that you think the marketplace can fulfil? It may sound obvious, but it’s not always the case. You really need to listen to your customers. Your customers may be saying, you are selling me food, why don’t you sell me drinks. You are selling me drinks, why don’t you sell me non-food? You need to think about what are the particular customer segments you are trying to serve.
Secondly, play on your strengths and be in line with your DNA. If you are trying with the marketplace to serve new clients with new categories you have never sold before, that is completely out of your DNA, it will not work. Try to see how the marketplace will add to your existing propostion.
Thirdly, be ambitous. I sometimes see clients who say I am going to test the marketplace in a small region with a couple of sellers. It doesn’t work. The beauty of the marketplace is about scale. Invest in offers and sellers. We often say at Mirakl, more sellers equals more revenue. You need to be a bit bullish and try to have right from launch a minimum viable ecosystem of sellers to fuel the growth.
Fourthly, don’t make it a side project. There is a value in bringing along sales and procurement, purchasing and product management. It’s very important. If you don’t explain to the rest of your organisation what it is about, what it can bring, it will trigger resistance. If you do explain to your organisation, it will accelerate growth.
Lastly, think in terms of horizons. Don’t try to put too much complexity right at the beginning. B2B tansactions is a complex world. You may want at the very beginning to only open your marketplace with credit cards, to open at one single price and then gradually increase the complexity of your marketplace.