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How the modern industrial buyer is changing the procurement process

A young man walks through an industrial manufacturing plant.

Generational changes and rapid advances in technology have deeply impacted the practice of industrial buying.

These were major findings in UPS’s 2019 Industrial Buying Dynamics study, which surveyed approximately 1,500 industrial buyers between the ages of 22 and 70 across 15 industrial sectors. 

A new generation of tech-enabled Millennials, those born between 1981 and 1996, has joined the workforce and is disrupting the playing field filled by manufacturers, distributors, and online marketplaces.

In turn, distributors are coming under pressure to find new ways of providing value to buyers as Millennials increasingly purchase direct from manufacturers or head to online marketplaces to do business.

Buying direct from manufacturers

The industrial buying study, now in its fourth edition, revealed a growing willingness to buy directly from manufacturers, with 38% of Millennials favoring manufacturers over online marketplaces (30%) and distributors (32%) as their primary vendor.

GenXers, those born between 1965 and 1980, cited manufacturers as their first choice of supplier 35% of the time, followed by Boomers (born 1946-1964) at 29%.

What’s driving this shift? The ability for manufacturers to communicate directly with customers online is likely one factor increasing the share of Millennial purchasers, who are more willing than older generations to cut out the middleman and go straight to the source.

Industrial manufacturers are also making themselves increasingly attractive in the marketplace. They are valued by buyers for their product quality and post-sales support, as well as their money-back guarantee offerings. Perhaps unsurprisingly, they share almost equal footing with distributors (42% vs. 43%, respectively) as the preferred supplier for original equipment manufacturer (OEM) parts.

Disrupting distributors, but bright spots persist

This ongoing disruption in the industrial buying landscape is something distributors must address quickly, as Boomers retire from the workplace at a rate of approximately 10,000 per day.  

No doubt distributors have work to do. Millennials are more inclined than older generations to buy from online marketplaces, where comparison shopping and buyer research are important components to decision-making. 

At the same time, buyers see performance weakness in the services offered by large and medium distributors. They are more disposed to view manufacturers and online marketplaces as purveyors of excellence in critical areas that directly influence the buying journey.

Nonetheless, there are bright spots for distributors. Buyers rate large distributors highly for the quality of their shipping services—they receive particularly good marks for shipping speed, where four out of ten buyers believe large distributors deliver excellence.

Distributors also remain dominant when it comes to the sale of industrial equipment, where they hold 44% of market share compared with 34% for manufacturers and 22% for online marketplaces.

It’s a similar story for maintenance, repair, and operations (MRO) parts, where about half of buyers trust distributors large and small with their needs. The same is true for purchases of industrial consumables and raw materials. Buyers appear to lean more heavily on the supply chain expertise of a distributor when it comes to the sourcing and procurement of big-ticket items and equipment maintenance.

Finally, smaller distributors are highly valued as a primary vendor. The concierge-style services of a smaller distributor win favor among all buying groups.

Online marketplaces becoming the norm

Online marketplaces might already be established venues for direct to consumer sales, but the world of industrial buying is embracing multi-merchant e-commerce sites with growing regularity.

These platforms are particularly frequented by Millennials, who recognize the convenience, selection, and robust shipping options they offer. Online marketplaces score well for orders of janitorial and sanitation (J&S) supplies, with almost a third of buyers (31%) across all ages preferring to visit these sites for J&S purchases. Distributors remain the dominant supplier for this category, with 51% of total share.

The trend toward online marketplaces is likely a natural extension of the high comfort levels felt by industrial buyers shopping online, with buyers from all three generational groups making purchases over the internet. However, Boomers and GenXers mostly keep their purchasing to websites, whereas Millennials are happy to spread their digital wings and place orders across multiple channels, from mobile apps to electronic data interchanges (EDI).

Meeting the needs of today’s buyers

As an industrial supplier, there’s a lot to consider when tailoring your approach to the modern buyer. Here are some best practices to keep in mind as you evolve your business to the needs of a changing buying environment:

  • Focus your business practices around what Millennials value most in the procurement process: choice, convenience, and customization.
  • Drive up excellence in every corner of your organization. Buyers have decreasing tolerance for middle-of-the-road service as the number of concierge-style options in the market grows. Smaller distributors seem to be taking this approach to heart.
  • Understand that Millennial buyers heavily weigh both pre- and post-sales processes in their decision-making. Make sure your management of the client life cycle is both comprehensive and compelling.
  • Invest increasingly in personalized services and speed-of-delivery solutions that give your business a competitive edge.
  • Evolve your product marketing to better engage with changes in buying habits.
  • Offer content that helps your prospective purchasers independently undertake product research.

Attitudes toward distributors, manufacturers, and online marketplaces among industrial buyers of different ages are complex and varied, as the 2019 Industrial Buying Dynamics study reveals.

What’s clear is the buying landscape is shifting, and just as distributors must up their game, manufacturers and online marketplaces should strive to capitalize further on the market opportunity before them. For further insights from the study, download our white paper and learn how changes in industrial buying are affecting the way business is done.

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