Letting the cat out of the bag. Side note: Don’t put cats in bags. That’s a horrible idea. Stop it. Telling tales out of school. For us hockey lovers north of the border, going offside. Whatever idiom you want to use, today I’m going to shed a little light on how e-commerce works in the B2B world, especially in our industry. And I’m going to do it in one very specific, potentially contentious area, pricing.
If you pay the price posted on a Distributor’s e-commerce site, you’re doing it wrong.
E-commerce was built for retail shopping; and shopping, at its foundation, is a consumer activity. Our basic shopping habits haven’t really changed that much with the invention of e-commerce, they’ve just become more efficient as digital tools provide us with more convenience to achieve the same basic goals. The core activity remains the same. You have a need (or want) for an item, you identify a seller or sellers of that item, you confirm the dollar amount the seller is asking for the item and then make a determination if you will proceed with a purchase.
In our not so near past, yet sometimes still in other parts of the world, this used to be accomplished in markets. Vendors had stalls of goods and buyers negotiated with them on the pricing of an item based on many factors such as relationship, the frequency with which you purchased from their stall, the quantity of an item you intended to purchase and sometimes, just for the sport of it. We’ll come back to this.
As the pace of the world increased, we looked to become more efficient in our shopping habits and expected more conveniences built around the activity of shopping. Markets evolved into the department stores, malls, and supermarkets we’re more familiar with today. Eventually we decided that we didn’t even want to leave our houses and, as the internet became more powerful, we were able to replicate the shopping process digitally.
What was lost, or changed, in this evolution was how we determined the prices of things. Economists will tell you that pricing has always been driven by supply and demand, and while that may be true in the broader sense, the practical application of that has shifted dramatically. When was the last time you went to the supermarket and haggled over a loaf of bread? Does the tech store employee know you so well that you get a special discount when the latest smartphone drops?
You usually don’t and therefore the seller controls the price of things more extensively than they historically have. Really the only practical way that you as a consumer can negotiate is by NOT purchasing. If sellers have inventory they want to move and no one is buying at the price they’re offering, that forces them to lower the price, whether through a sale, a markdown, or a clearance. There’s that supply & demand dynamic in action. Still, if you know you want something, but you think the price is too high, you can’t negotiate in the moment. You have to wait for that price reduction and sellers aren’t always up front about what triggers that or when it will happen. Don’t get me started on manufactured sales like Black Friday or Boxing Day…
To bring this back to e-commerce, digital tools have shifted some of this power back into the consumer’s hand as there are platforms that scour the web for deals or allow you to set pricing alerts that trigger a notification when a price goes down on a target item. Heck, Google is nice enough to line up a set of prices on virtually any item you search for, right in the results!
This is all great for consumer “shopping” but let’s finally get to the point of this post, what does this have to do with buying a welding helmet or a box of N95s for my shop? When you go out and look for supplies for your business and make a buying decision about them, that’s called “procurement”, not shopping. They may seem similar but there are some fundamental differences and if you understand that, you can save your business a lot of money and be much more effective in your job.
For starters, procurement is broken into two distinct activities, sourcing and purchasing. If you’ve worked for large construction companies or a sizable industrial firm, like an oil & gas company, you probably have a purchasing department, and it may have sourcing specialists that work there. I’m working on another blog post about each of the activities but for now, we’ll just distinguish the two by saying that sourcing involves the identification of a product or service that is appropriate to solve a problem that a company has. Purchasing is the act of figuring out the financial terms for that item or service most effectively.
Here’s how that plays out online currently. Sourcing = Google. Purchasing = Shopify. You could also make a case for Amazon in both those cases, but the end result is the same.
Now here’s the problem with that, especially as a Canadian. Google’s results don’t understand context. “I’m looking for TIG rod that I think should work with 5052 Aluminum and I need it in Edmonton in 3 days and at a reasonable price because I already bid out this job before my customer confirmed their material spec. Oh, and I need enough to weld 12000 inches.” – is not a statement that Google understands well or is able to answer without a lot of effort by you, the person whose job, reputation or company is on the line if you can’t find this stuff. Side note – I’m curious to see how the new Bing/OpenAI integration answers this question. See how ChatGPT did here.
Actual search results from that sentence.
That search only gave me one starting point to actually accomplish my goal. Shout out to the SEO team at Hobart (one of our partners) as there was a link to a technical article about welding 5052 grade aluminum. Even if we had got a Distributor hit, chances are it would have been American and that raises a whole bunch more complexity in our sourcing journey.
At this point you should be thinking two things; 1. I know how Google works and you don’t type complete sentences into it like that pal, and 2. What does this have to do with pricing?
The short answer is, nothing and that’s the problem. Tools like Google & Shopify are, as we’ve covered, amazing for retail but do not do a great job yet of linking complex technical questions to the practical answers we need like price & availability. Even once you identify a product the results aren’t great!
Sure, your favourite Distributor may have a preferred platform, outside of these, that they use that you “login” to and it’s supposed to give you your company’s specific pricing. But if you use one of those, I want you to try something the next time you’re ordering anything. Login, get your price, then call their order desk and ask for a better one. 95% of the time they will give you what you ask for.
You may ask me, what’s wrong with that? I just saved myself a couple of bucks!
But did you? That took time & energy out of your day that could have been spent on more productive activities. And if that’s what you have to do every time you order something?! When are you going to get the actual job done?!
What if the system your Distributor used allowed you to connect directly with the order desk and get that pricing (along with availability, expertise, product recommendations and a whole lot more) the first time it was quoted? Hmmm… that sounds familiar…