SELLER, ENABLEMENT

B2B Trade Enablement Series: What is Seller Enablement?

What is Seller Enablement?

Seller enablement is the internal capability that buyers unlock by using technological infrastructure, expertise, and education to onboard, integrate, and manage third-party brands and manufacturers (i.e. “sellers” or “vendors”) in B2B trade.

Seller enablement is a competitive advantage for buyers. We’ll illustrate why in this post.

But first, what is a buyer?

For definitional purposes, a “buyer” in B2B trade could be any of the following organizations:

  • Aggregator: B2C or B2B marketplace, retailer, or distributor. The success of the business model of an aggregation business is often predicated on their seller mix and margin. Sellers are the start of the flywheel for aggregators. Sellers initiate a network effect for aggregators, so it’s in the best interests of the aggregator to onboard and merchandise sellers that make the network more attractive to buyers over time.
  • Manufacturer or Brand: A producer of a good that purchases unfinished materials in bulk. Manufacturers and brands are often sellers, but in the context of production or packaging, a manufacturer or brand will be a buyer of goods.
  • Software Company: A digital interface for businesses that involves orders, invoices, fulfillments, and product information from B2B partners. This kind of buyer deals with B2B relationships in the form of bits versus atoms. Ecommerce platforms and POS companies exhibit the characteristics of a digital buyer. Behind most ecommerce or POS merchants are suppliers who sell goods to the merchant for resale. Convictional can turn those software companies into B2B trade networks.

Convictional’s platform provides the three pillars of seller enablement. With infrastructure, expertise, and education built around a modern platform, Convictional enables buyers to (1) onboard; (2) integrate; and (3) manage any kind of seller.

Investing in seller enablement capabilities unlocks a variety of use cases for buyers, including:

  • Launching a multi-vendor B2C or B2B marketplace
  • Going from single-brand to multi-brand as a retailer
  • Building a trade network with existing seller relationships
  • Augmenting owned/bought inventory with a direct vendor fulfillment model (‘drop ship’)
  • Reducing inventory and fulfillment costs and risks for online orders
  • Automating inventory reordering/replenishment
  • Expanding the assortment to be more relevant to current and future customers
  • Managing vendors/sellers from a single pane of glass
  • Making your seller onboarding checklist as easy to implement as installing Candy Crush on your iPhone

Through years of research and customer development, we have learned that the sellers that buyers often partner with can be segmented into two categories: Modern Sellers and Classic Sellers. Often, buyers work with a mix of both Modern and Classic Sellers, but the requirements to enable each segment will vary significantly. We know from experience that large buyers are usually in for a rude awakening when they have invested in legacy EDI only to realize that legacy EDI isn’t the compatible enablement method for Modern Sellers.

One of the first questions we get asked by buyers when introducing the Modern Seller and Classic Seller framework is whether this framework strictly applies to certain verticals (e.g. office supplies) or industries (e.g. retail). Years of work in B2B trade across many verticals has led us to conclude that the Modern and Classic Seller segmentation applies horizontally across every vertical and industry in B2B trade. Whether you are a buyer of wellness products or a distributor of industrial supply chain goods, your business will attempt to enable Modern and Classic Sellers. It is imperative to have seller enablement (i.e. the technological infrastructure, expertise, and education) in place to prevent seller churn and negative customer experiences.

The purpose of this post is to explain the key differences between Modern and Classic Sellers.

Classic Sellers:

A Classic Seller is a brand or manufacturer that uses a custom or enterprise ERP (on-premises or cloud version) to manage purchase orders, inventory, and invoicing for buyers. Other B2B trade elements like product information may be unbundled from the ERP. Their preferred trading partner integration methods include EDI and/or CSV via SFTP. Classic Sellers typically have an EDI Manager who manages incoming B2B transactions. They often work with large buyers due to the investment required in onboarding or maintaining a B2B relationship. Classic Sellers usually provide legitimacy to a buyer’s assortment, but tend to appeal to customers on the basis of price due to the commoditized nature of their distribution. Purchase intent is driven by price and loyalty to a distribution channel, not necessarily discoverability. Classic Sellers are accustomed to going through B2B partners for wider distribution. In many cases, selling directly to the end customer may not exist or it represents a small percentage of total revenue.

Example: Calvin Klein.

Modern Sellers:

A Modern Seller is a brand or manufacturer that uses modern cloud-based systems to run their business with the purposes of selling directly to consumers. Examples of common systems include Shopify, Shopify Plus, and Salesforce Commerce Cloud. They may use an ERP system like NetSuite, but it tends to be connected to a customer-facing system, usually a modern ecommerce platform. Modern Sellers prefer API based integrations and connectors and typically lack experience in EDI. Any prior experience with EDI is usually the result of using web forms resulting in manual inventory updates, data entry from POs, and manual invoicing. B2B relationships are usually managed by an Ecommerce Manager or Marketplace Manager. Interestingly, Modern Sellers start out by selling directly to customers (DTC), choosing to bypass resellers or channel partners altogether. Once Modern Sellers reach a certain threshold of sales, they turn to B2B channels in order to continue growing profitably.

Example: Nili Lotan.

Classic and Modern Sellers are converging in many ways. A seller that doesn’t do EDI today with any B2B partners is likely a Modern Seller. A seller that dismisses smaller aggregators is usually a Classic Seller. Classic is trying to learn direct-to-consumer; Modern is trying to unlock growth by adding more B2B channels. The business systems, preferred integration methods, and type of channel are the determining factors of whether a seller is compatible with a buyer’s existing seller enablement capabilities.

A retailer, marketplace, or distributor should be set up to enable any kind of seller, irrespective of their preferred business systems and preferred integration methods.

Seller Segmentation Summary:

Segment Preferred Business Systems Preferred Integration Method Large or Small Distribution Characteristics
Classic Seller ERP (cloud or on-premises) EDI (via SFTP or AS2) Large B2B by default
Modern Seller Ecommerce API Small or Large DTC by default

For the past decade, large buyers thought that they could force Modern Sellers down the preferred onboarding and integration path that is conventionally used by Classic Sellers. This friction can lead to the downstream implication of a retailer, marketplace, or distributor losing market share or, worse, insolvency by failing to maintain relevance of its assortment to customers. Seller enablement dictates these business outcomes.

Seller enablement is the only way to future-proof an aggregation, software, or production business that relies on third-parties for trade.

Case Study:

To see how Modern Sellers are impacted in a buyer’s onboarding funnel with and without seller enablement, we demonstrate an example of a large North American retailer.

Pre-Seller Enablement

Assumptions:

  • 80% of current vendors are not on API-based supported platforms
  • 20% of current vendors are on API-based supported platforms
  • 30% of new connections are with classic sellers
  • 70% of new connections are with modern sellers
  • 15% of vendors churn due to cost and complexity from EDI ask
  • 100% of Modern Sellers connect manually (no automation)
  • 1/10 line items from manual vendors are oversold/cancelled
  • 1/1000 line items from integrated/automated vendors oversold

Outcomes:

  • 30% of vendors are able to be automated (EDI-only)
  • 15% of vendors disqualify due to cost or EDI requirements
  • 55% of vendors use legacy EDI manually via web forms (browser based EDI)
  • 5% of line items are cancelled due to oversold inventory

Visual:

Pre-Seller Enablement

Convictional: Post-Seller Enablement

Assumptions:

  • 30% of new connections are with Classic Sellers
  • 70% of new connections are with Modern Sellers
  • 80% of current vendors are not on API-based supported platforms
  • 20% of current vendors are on API-based supported platforms
  • 0% of vendors disqualify: no fixed fees for sellers, no EDI ask
  • 100% of Modern Sellers connect if using an API based supported platform
  • 1/10 line items from manual vendors are oversold/cancelled
  • 1/1000 line items from integrated/automated vendors oversold

Outcomes:

  • 95% of vendors (classic and modern) are automated
  • 5% of vendors stick to manual approach (unsupported platforms)
  • <1% of line items are cancelled due to oversold inventory

Visual:

Post-Seller Enablement

Commentary:

Post-seller enablement, a buyer experiences less churn in their seller onboarding funnel and better customer experiences as a result of fewer instances of overselling and a more relevant assortment. That’s because Convictional’s platform enables both Classic and Modern Sellers to participate in automated B2B trade. Another consequence of implementing seller enablement is that buyers also gain an on-ramp to any business using a modern, API-based system which offers a comparative advantage to close competitors.

Seller Trends:

When we begin working with a buyer, we perform a Seller Portfolio Analysis on their existing mix of sellers. The output of the analysis classifies every seller that a buyer works with by Modern or Classic along with their corresponding technographics. We can also observe how a buyer’s seller portfolio has changed over time. For most buyers, the percentage of Modern Sellers onboarded grows rapidly while the percentage of Classic Sellers onboarded decreases over time. We suspect that there are two reasons for this general trend. The first explanation is that more Modern Sellers are now graduating into B2B from a pure DTC business model. There is a wave of DTC brands and manufacturers who are now looking for new B2B channels to continue growing, but the lack of enablement for Modern Sellers is preventing more B2B trade from happening. Second, the number of new aggregators implementing legacy EDI seems to be slowing. More businesses are adopting systems that communicate with other systems primarily by API which crowds out EDI-based systems over time.

The Future of B2B Trade:

EDI still remains the most dominant form of B2B trade. Is this because it’s favored by incumbents with market power or because it’s a superior way to facilitate trade?

Our conclusion is that Modern Sellers prefer API-based methods of B2B trade versus legacy ones which suggests that EDI’s dominance is the result of market power rather than it being a better way to facilitate B2B trade. EDI also only captures a small number of “jobs to be done” in B2B trade. Legacy EDI overlooks critical functions in B2B transactions such as syndicating product information, payments, and inventory syncing.

The future of B2B will be enabling Modern and Classic Sellers to trade with any kind of buyer, despite the preferences of either side. For that to happen, buyers and sellers need to be integrated with their existing business systems. The fragmentation of B2B is solved by meeting buyers and sellers on the systems that they already use to run their businesses and automating all of the jobs to be done. Seller enablement is the key to buyers being more competitive and growing faster.

Now that we’ve explored how buyers can leverage seller enablement, we can apply the same principles of enabling trade partners from the perspective of the seller. For sellers to enable buyers, they need to consider—you guessed it—buyer enablement. We will cover buyer enablement in our next post.