Retailers expand B2B offerings

Diversification is one of the best defenses to mitigate supply chain risks – ports, suppliers, carriers, and customers - as retailers add business-to-business (B2B) to their focus to smooth out bumpy business-to-consumer (B2C) revenue.  

According to a survey by consulting firm McKinsey, nearly 65% of B2B companies across industry sectors now offer e-commerce capabilities, and this is up from 53% in early 2021. McKinsey defines B2B e-commerce capabilities as fully executing a sales transaction online.

McKinsey also found that close to one in five B2B companies have built marketplaces - either directly or through partnerships - and another 60% are in the process of doing so.

W.W. Grainger was one of the earliest businesses to embrace B2B e-commerce by offering its catalog on CD-ROM in 1995 and then online in 1996.

Amazon introduced its B2B marketplace in 2012, AmazonSupply, and then in 2015, renamed it Amazon Business.  

Just as retailers followed Amazon and others online to sell goods to consumers, retailers are launching their own online B2B services.

“We continue to believe our B2B business presents a sizable growth driver for us as it disrupts an underserved estimated $80 billion total addressable market,” President and CEO of Williams-Sonoma, Laura Alber, told analysts during the company’s Q3 earnings call on Nov 17.

According to Williams-Sonoma’s CFO, Jeff Howie, the company is on track to hit $1 billion in B2B revenue this year.

Williams-Sonoma is also diversifying into new industry verticals including the healthcare space through multi-property partnerships with national accounts Alber told analysts. “In September, we successfully launched our improved corporate gifting and custom merchandise services, and we are encouraged by the early success leading into the holiday season,” Alber also said.

Some retailers have taken the extra step to link their B2C and B2B platforms much like linking the B2C online store to the physical stores.

“We are pleased with the traction we are seeing in our interconnected business as we continue to build on our momentum with both, our Pro and DIY customers. For example, as we have better functionality and capabilities in our Home Depot app, we see greater engagement. In fact, throughout the year, we have seen strong double-digit growth in monthly active users versus last year,” President and CEO of Home Depot, Ted Decker told analysts in its Q3 earnings call on Nov 15.

Home Depot launched Home Depot Pro in 2018 and optimized its supply chain to manage both consumer and professional demand. It added more fulfillment centers that can provide one- and two-day delivery service to over 90% of the population. It also added flatbed delivery centers for consumer and pro deliveries.

Likewise, Lowes is also optimizing its supply chain to manage its consumer and professional demand. Current CEO, Marvin Ellison was instrumental in interconnecting the consumer and pro platforms, similar to Home Depot.

“Turning to Pro, we delivered growth of 16% and 36% on a two-year basis, the tenth consecutive quarter that we’ve driven double-digit Pro growth,” Ellison told analysts during Lowes’ Q3 earnings call on Nov 16.

Meanwhile, Advanced Auto Parts appears to keep its consumer and professional online businesses separate for now.

Advanced Auto Parts entered the B2B space in 2014 with the acquisition of General Parts International, a distributor and supplier of original equipment and aftermarket replacement products for commercial markets operating under the Carquest and Worldpac brands.

Today, Advanced Auto Parts’ B2B online presence is a separate website from its consumer website. However, according to a CFO interview with Advanced Autoparts’ CFO, Jeff Shepherd, the company is integrating four supply chains into one.  “We’re still on the journey from four supply chains to two through the end of this year and looking to go from two to one in 2023,” Shepherd said.

Indeed, the company has implemented a single ERP system and a single replenishment system to supply stores based on the different parts going to other stores in a region. Moving forward, Advanced Auto Parts is implementing a single WMS and a common labor management system on top of that to introduce a standardized level of productivity, according to Shepherd.

While it combines supply chains, Advanced Auto Parts continues to build out its B2B website, which has reached record levels, according to CEO Tom Greco.

“Strategic partnerships are also enabling us to drive our connected shop initiative, which enables customers to access tools and data resources, generate faster repair order approvals, deliver higher conversion rates and improve shop efficiency. With our connected shop, Advance Pro and Carquest Pro are directly integrated into Tekmetric, our exclusive partner and industry-leading shop management system. This powerful workflow combination allows our Pro shops to purchase parts and drop them directly into repair shop work orders quickly and easily,” Greco told analysts during the company’s Q3 earnings call on Nov 15.

Other retailers offer B2B services, such as VF Corporation, the parent company of brands such as Vans, The North Face, and Dickies. The Dickies brand can be found online and in stores such as Walmarts, Tractor Supply and Target. In addition, Dickies sells to businesses that require uniforms.

More retailers will likely diversify customers, while traditional B2B businesses will probably add consumers to their list of customers. To succeed, a single, optimized supply chain will offer businesses more efficient operations at a lower cost.

Thanks,

Cathy

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JOC - Retailers bank on themselves to handle final mile (Thank you Eric!)

Air Cargo World - Retailers look to unload excess inventory for holiday peak

Air Cargo World - FedEx struggles to return to normal operations

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