The Channel for Business Product Sales Will Flatten-- and be Dominated by a Small Number of Mega Channels

Print

By Braham Shnider

Braham ShniderThe sale of physical products (something with a SKU number) and some horizontal-based consumption based services (mainly IaaS) will be dominated by a small number of mega channels. In this blog I will deal with why this is going to happen, what the future will look like and the implications for us all.

Let’s begin with “Why?”

As I wrote in an earlier blog, we as individual consumers are increasingly using B2C digital sales channels over traditional consumer channels. Through advanced analytics, B2C digital sales channels know what and who we like or not, who we are influenced by, what we want to buy, how price sensitive we are etc. As B2B customers, many of us also want this hyper-personalized customer experience in the B2B buying process. Most business customers prefer to do their own research using search, social media, chat, blogs etc.

In the past, the criteria from whom a business customer bought from was based on a good product knowledge, low contractual price, standards, supportability and controls in the buying process. Increasingly as purchasing inside businesses is moving to a decentralized model, business buyers are much more concerned with getting the lowest price in the market, speed of delivery, convenience and personalization of their information.

Transparency is the new world order. Today’s IT supply chain is not efficient with many touch points nor is it transparent-- many customers pay a premium without realizing it. This is because we have an inefficient system of matching buyers and sellers.

Digital marketplaces will provide a much more efficient system of matching buyers and sellers whilst giving buyers what they want: the lowest price, very fast delivery, convenience and personalization of their information. The operator of the digital marketplace does not own any inventory-- they provide an efficient platform to present other people’s inventory to a user and facilitate a transaction.

I expect as much as 50% of all B2B IT product sales to be conducted through digital marketplaces within 4 years.

What will the future channel look like for business product sales?

There will be numerous types of marketplaces including…

To deliver this market-based buying experience requires significant economies of scale, with a core business of providing a multi-channel, highly customized digital experience. Only a few channel partners in each geography will have the size, funding and business model to be able to compete on the razor thin margins that will result. These partners will likely be…

What are the implications on channel partners?

Click to enlarge chart.

Chart

What are the implications for product vendors?

That’s my take. Do you think the channel will flatten by 2020 and product sales will be dominated by a few mega channels?

Join me next week for my next blog on “channels of the future.”

Feel free to reach out to me to discuss or--even better-- to let me know if I can help you and be your GTM disruptor.

Braham Shnider is a channel management expert, strategic thinker, change agent, and implementer of innovative hybrid sales models for global companies in more 30 countries. Braham was the founder and served as CEO for 13 years at Channel Enablers, a global channel training provider for vendor channel teams and channel consulting solutions company with expertise in multi-channel routes-to-market. He negotiated the sale of Channel Enablers to Miller Heiman Inc. in 2013. Braham continues to work with a select few global clients on their next generation channels and partner ecosystems.