How Can Distributors Conquer the Small-Order Challenge from Marketplaces?

Top online marketplaces raked in more than $3.25 trillion in 2022, according to Digital Commerce 360. Over the next few years, marketplaces will capture nearly 60% of all global ecommerce sales. According to the same report, third-party sales through marketplaces are the largest and fastest-growing channel globally.

Marketplaces like Amazon Business are a rocket ship, and they provide distributors with increased exposure, enhanced brand recognition, new customer acquisition and greater sales.

B2B buyers are increasingly tapping into these platforms for purchasing. According to Digital Commerce 360, for example, more than a third of respondents to a recent survey said they are doing half their B2B buying through marketplaces.

The question most distributors are trying to answer is, “How can they profitably hang on for the ride?”

One of the biggest challenges many distributors face with the marketplaces is the proliferation of smaller and often more diverse orders than through traditional channels.

Small orders tend to be money-losing propositions in most distribution businesses. If the gross margin dollars don’t cover processing costs, are the orders worth taking on? Costs include:

• Labor costs, including picking, packing, and shipping the order
• Hands-on paperwork for each individual shipment
• Freight charges, potentially higher due to meet marketplace timing requirements
• Packaging costs
• General overhead

Small, frequent orders—such as those that come from marketplaces—also tend to tie up cash.

These challenges, combined with the speed and accuracy requirements dictated by the online marketplace, add a level of complexity that can be intimidating for distributors that want to dip their toes in.

Distributors must carefully analyze costs, including marketplace fees, shipping, packaging, and overhead, to set prices that attract customers while still generating profit.

How Distributors Can Overcome the Small-Order Challenge of Marketplaces

Distributors can leverage technology to overcome these challenges and make marketplaces worth their time. Dynamics 365 for Finance and Supply Chain Management provides a comprehensive suite of tools to help distributors optimize pick, pack, and ship for marketplace operations.

• Break down order silos — Manage the lifecycle of orders across all sales channels in one place with Intelligent Order Management.
• Optimize fulfillment — Improve pick-and-pack processes for greater efficiency and lower costs. Wave processing features order data at the warehouse level. The system generates pick lists with specific items, quantities, and locations. How the picking information is generated can be tailored for your company or a scenario. It can even be paperless. Warehouse staff use the containerization (automated) and packing features (manual, but facilitated) to improve packing. Finally, print labels closer to where the work is performed. 
• Integrate with shipping carriers — Use a proven third-party solution to integrate Dynamics 365 with shipping carriers to retrieve shipping rates, print labels, and track shipments directly from the platform. The software simplifies the accelerated shipping required in online marketplace settings. 

These features enable distributors to compete more effectively in the online marketplace while complying with third-party vendor service delivery standards. The goal is to reduce staffing needs, gain more flexibility and scalability, and grow revenue profitably.

Partner with the team of experts at Sikich to leverage technology to improve operational efficiency and increase margins, no matter the sales channel. Contact Sikich today.