Why only 5% of distributors call e-commerce their top channel

Episode 19 - Why only 5% of distributors call ecommerce their top channel - Transcript

Note: in this episode, we refer to the State of Sales in Distribution 2026 report from Phocas.

Matt: Welcome to Data Versus Commerce, where we explore the messy middle between database and doorstep. I’m Matt Johnson.

Floyd: And I’m Floyd Blaikie. Let’s dig in. Hello, Matt.

Matt: Hello, Floyd. How are you today?

Floyd: I'm doing great, and I've been trying to think of better icebreaker questions, but I'm not doing well. Do you have a favorite icebreaker question? Obviously, the ice between us is crushed. It's a slushie at this point, but let's pretend. What's your favorite icebreaker question?

Matt: Oh, to your point, Floyd, we need no icebreaker around here. We're not fans of small talk. We like to jump in the deep end. But I would say I'm always curious about what people do on the weekends, because that tells you a lot about people outside of work. So...

Floyd: Okay. Okay. What do you do on the weekends, Matt?

Matt: You probably know that I played competitive golf for many years, so you'd think I'd be a golfer. But I kinda got burned out on it, so now my big thing is going out on the boat. I love taking the boat out, sometimes cruising. I'll take the kids out there. Yeah, it's...

I love being on the water. I have to get outside because I spend the vast majority of my life in this little room, so being outside is everything.

Floyd: Matt's a boat guy. I'm a boat guy, but it's a kayak, Matt. Let's be honest, it's not a yacht. I got a kayak and I do be paddling around, but okay. All right. This is good. Me on the weekends, I like to read reports.

Matt: No way. Yes? Yeah, is that real?

Floyd: Maybe not all weekend, but I am a nerd. Obviously we're both nerds. We're here doing a podcast about data and e-commerce. And I love a number, I love a stat, and I'll get lost. And I actually got pretty lost in a report this morning, and I wanna talk to you about it. I'm very hyped up about this.

Fresh off the presses. This is from Phocas, and they provide an intelligence layer within your ERP. So I think they've got a pretty good sense of what's going on. They did this research. I just wanna put that out as a disclaimer, okay? Every stat I'm about to quote is coming from this State of Sales in Distribution 2026, from Phocas.

Trusting that they've done the research in a way that makes sense and is statistically significant. So if any...

Matt: Not sponsored by Phocas, but we should be. And we'll be reaching out to you guys soon.

Floyd: Exactly, yeah. I'm waiting for sponsorships from them and also from Bubly. I'm not drinking my canned beverage on screen, though, until they give us a cut of that. Sales.

Okay. So let's go into this report, Matt, because it has completely captivated me, and I do think that there's some stuff in here that you're gonna wanna hear about.

So they interviewed 100 distributors, and they asked them questions about what's driving their sales performance in 2026. Of course, you cannot do any type of research, report or survey these days without mentioning AI, so there is some AI stuff in there. And also talking a bit about the tools that they tend to use in the day-to-day.

I'm just gonna go through this in order, because this is not a criticism of the report. In fact, it's quite the opposite. I think the report illustrates some real deltas between what distributors are doing and what they believe and what's kind of happening on the customer side.

First of all, distributors across the board are looking to get more share of wallet from their existing customers, and also, of course, get new customers. But 34% of distributors are not measuring their new business win rate, 32% are not measuring their existing account win rate, and 39% don't track or don't know their forecast accuracy.

Now, we usually talk about product data through the lens of commerce, right? But this is data, this is commerce. Does this surprise you, that almost 40% of distributors can't accurately forecast sales?

Matt: No, that doesn't surprise me at all. In any organization, when you reach a certain point, data in whatever form and in whatever system it lives starts to become a problem. And often it is around the areas that get the most attention, ironically, right? So you'd think, "Okay, this is very important information."

But because it is used oftentimes by so many different people in the organization, and there is so much activity, it's the area that gets dirty the fastest. And yeah, I've seen it: customer account data, historical purchasing data. This is the stuff that could really move the needle.

But again, just like product information... We talk a lot about product data, obviously, 'cause it's so key to commerce, but we often don't talk about the importance of customer data and historical sales data. Because if you're building an e-commerce experience, one of the biggest things you can do in terms of moving the needle for the organization is learning what your customers want to see inside of their portals, and then surfacing products that they could be buying from you that they're currently not.

But all of that comes down to the fact that you need to understand your account data. And yeah, it comes back to leadership and governance, just like it does in the catalog.

Floyd: Wise words. We all need better data governance. I wanna get into what I think is a big difference between what distributors think customers want and what they actually want, okay? So in addition to the distributors, they did do some surveying across buyers in the industry from a bunch of different sub-verticals.

That breakdown's in the report. But they asked customers what they want, okay? And then they asked distributors what they think is important for sales reps to have. So 75% of distributor respondents said that strong product and usage knowledge is super important for sales reps to have. And I think we've seen this in a lot of our conversations, Matt, where product data and making sure that's clean and complete is one thing, but they're also really prioritizing making sure that information is in the heads of all of their reps.

And sometimes, I mean, obviously that's a good thing if your reps are really well informed and know what they're talking about. But it's not stored in the same way in their actual product database. So what ends up happening is customers can't find the information in their catalogs and end up going to the reps.

So that's one thing. When they asked customers what they actually want out of that sales experience from distributors, only 5% said technical expertise. What a gap that is. Why do you think that is, Matt?

Matt: It's pretty simple, right? Why would I ask a rep, or why would I wait to ask a rep, about technical information that is readily available at my fingertips? So what I typically see is that distributor sales reps are asked to be technical or category experts, right? In whatever category their customers are buying.

And that's the way it used to be, right? They held all of the knowledge, they knew all of the vendors, they knew the product lines, they knew when new items came out, and they were sort of the gatekeeper of that information. But now an end user, a distributor customer, is going to go do their own research first, and it's usually at the manufacturer level.

So, I have a list of parts, I'm working on a project, or I need to source something new. They're not waiting to talk to a rep to do that work. They've done that work ahead of time, and what they're looking for from a rep experience is negotiating the best deal and the best lead time.

So it's all about the commercial aspect. And so I would say, if you're a distributor leader, a sales leader in an organization, maybe let your website do the heavy lifting when it comes to the technical information.

And train your sales reps to uncover new opportunities and focus on those relationships, the things that the website still can't do and AI can't do.

Floyd: Well, it's really interesting that you say relationships, right? 'Cause that's different from technical expertise. You can have a rep that knows everything about every product in the catalog and just is crappy at building relationships, you know what I mean? Those are different skill sets.

So I won't go into every single vertical, but keep in mind that 75% of the respondents said that having strong product knowledge is a desirable quality, one of the top desirable qualities in their reps. If you look at industries where there is a lot of complexity in the catalog... I'm looking at the results for electrical, for example.

And Matt, I know you have a lot of experience in electrical manufacturing and distribution. 75% saying strong product knowledge in electrical. Then on the customer side, 40% are looking for fast turnaround of quotes and orders. 20% are looking for service and relationships, so it is still important. And the other 40% are split between multi-category convenience and best price.

Nowhere in that list is technical expertise. It didn't even register as 1%. It's not there. Are you surprised that nobody is looking for that from electrical distributors? Are they counting on that information being available in the catalog and on the website, and just kind of discounting even the possibility that a rep will be able to help them with that?

What's going on here?

Matt: Yeah, I mean, when you're talking about some of these hard goods distributors, MRO, electrical, HVAC, you have to remember... And for any retail-focused practitioners that are listening, this might be a good example of the difference in these industries. So, I'm not shopping.

I'm not looking to discover the right shirt or tennis shoes, right? Or a kitchen set. It's not about preference. I have a very specific bill of materials that I need to fill. I have very specific replacement parts, or wiring harnesses, fuses, components that go into building a data center or repairing a commercial electrical system.

These things don't change very often. So I know exactly what I need, which is why we often see some of the lowest adoption rates for e-commerce in these industries. Because I just need to get my stuff, right? I just need to know where my stuff is. I've got a project, I've got a customer who's waiting on something that I need to get my hands on.

So it becomes less about the e-commerce experience, less about finding something new or shopping or researching, and it becomes much more about visibility into the status of my quote and my order. And that's, again, a choking point for a lot of distributor sales teams. The constant question is, "Where's my order? Where's my stuff?"

And so that's oftentimes a human in the loop answering those questions, which is kind of silly, because a digital screen can provide that. And we have the technology, of course, to provide updates and notifications. But a lot of industries like electrical or MRO haven't adopted those tools.

Floyd: Yeah, I think there might be some fear that outsourcing some of that information gathering to technology is gonna damage relationships. But I mean, I'm using self-reference criteria here, of course, and I'm not in the habit of regularly purchasing large quantities of electrical components.

Matt: No?

Floyd: No, no, not these days. Just dishwasher parts, if you recall. By the way, I'm buying a new dishwasher. We can talk about that in a different episode. But I think that I would feel more affinity toward a brand, whether I'm interacting with a machine or a person, if they made it easy for me to get the information that I want.

I don't care if that's a guy named Matt or a robot named Matt. It's gotta be fast. And that's what we're seeing in this data: particularly in electrical, and again in building materials and lumber, almost half of respondents are saying the number one most important thing to me is not "Can I get a real person on the phone right away?"

It's not "Does your rep know everything about every catalog you've published since the 1920s?" It's "Can I get my stuff fast?"

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Floyd: Maybe the most surprising stat to me in this report, although again, Matt, this probably won't surprise you at all. The top performing channel, according to 55% of distributors, is field sales. And that part doesn't surprise me very much, actually.

We know that's still important, and we know that some of this new technology, as we heard in episode six with Tromml, is going toward enabling field sales. That's not going away. But only 5% of distributors said e-commerce was their highest performing channel. I expected that to be higher.

Matt, can you please tell me why it's not higher?

Matt: Right. Well, it's not a simple answer. There's many factors involved. I mean, starting with legacy systems, legacy processes, and just legacy thinking, right? If it's not broke, don't fix it. So a lot of these distributor customers are sort of on autopilot, right? Think about their business.

It's, "I need the same stuff over and over." The field sales rep makes it easy because they show up at the right time, or they're a phone call away. I don't need to go into a system and log into a portal, upload a spreadsheet. I already have a quote. I have contract pricing a lot of times.

So I can just say the word to my rep and get what I need. And sometimes it's completely on autopilot. So that's part of it. But what does that mean, right? If you've built your business around that model, that means you're really more in the retention business than in the growth business.

And so there's the advantage of being able to incorporate a hybrid model, where the field rep is on call and maintains the relationship, but ordering is processed through a portal, and then those buyers are able to engage in different promotions and cross-sell and upsell campaigns.

And then of course, making it easy to become a new customer, right? Attracting buyers that you never interacted with before. This is what the best distributors do. Every distributor sales rep that I've ever talked to understands that they only have a fraction of the wallet from their customers.

They're oftentimes buying from multiple competitors, and there's all of this long tail of on-demand equipment, tools, safety products, disposable products that they oftentimes are missing. And it's not insignificant dollars at stake. So they're buying them from something easy like Amazon B2B, or some of these other big boxes where it's fast, it's cheap, and the process is easy, because they're not the thousand-line-item POs.

They're onesie-twosie stuff. And if you don't have a good e-commerce experience, you're just missing that.

Floyd: Okay, I'm gonna take a little detour into AI world before I get back to one other takeaway from some of the sales team data that I wanted to have you, frankly, explain to me.

We gotta talk about the AI stuff. It is par for the course, of course, these days. Of all of the respondents in this survey, just under half are using AI today, 49%. So pretty close, virtually half. That's a rounding error. Another 29% are planning to adopt it within six months. 22% of the distributors that were surveyed have no plans to adopt AI.

I thought that was interesting. I didn't find it very surprising, but maybe it is a little more surprising paired with this insight. Of the 22% that responded and said, "Nope, no plans to adopt AI," every single one of them had a sales team of under 20 reps. Or put another way, every single distributor with more than 20 reps on their sales team in this survey has already adopted AI.

So I'm wondering, is this just a case of, when you have a sales org of a certain size, you kind of have to adopt AI if you want to be efficient and have access to the right information at the right time? Or is this a case of smaller organizations just being laggards? Or is it something in the middle?

Matt: Yeah, I mean, they're gonna come along, for sure. There was a time that even I remember when not everybody had a website, believe it or not, right? Or not everybody put their catalog on their website. And then they realized, okay, this is kind of a big deal. So they'll come along.

They are lagging, but the reason why is because at scale, the amount of hours that your sales team spends becomes a very significant lever in terms of your overall profitability and your ability to serve customers without continually adding head count. In distribution, your sales organization is your number one operational expense line.

That is the biggest area for you to make a difference. And so when I think about where AI is being put to use most frequently in distribution companies, it has to do with the manual labor that is involved in serving a customer. So it's all about the cost to serve. If I can just move the needle a little bit, that matters big time, the bigger you are, right?

So if I can cut out four hours a day out of my staff of 250 reps, that's something that's gonna catch your attention, and you're going to invest in different experiments and platforms that are gonna help you do that. It's not as big of a deal for the smaller companies, because they just...

The ROI on some of these tools is not gonna make sense, or at least won't make as much sense as it does the larger the organization.

Floyd: Right. That kind of time-saving scales dramatically when you're talking about 200 versus 20 reps. I think that makes a lot of sense. So, back to the sales team in general. This is where I start editorializing a bit, of course. But I'm looking at some of the responses to the question, "What is the most pressing internal issue on your sales team right now?"

And it's pretty split. There's no clear front runner here. The largest respondent segment was 20%. They said sales reps not knowing what accounts to prioritize. Just behind that, at 18%, pipeline and forecast accuracy. 16%, internal systems don't connect, so manual workarounds are common.

That one sounds pretty familiar to us. And then down at 14%, getting accurate information about customers and products. Now, we work in product data, so I suspect this might be a case of "when all you have is a hammer, every problem looks like a nail," right? But this is what it's feeling like to me.

Can all of these problems, not knowing what accounts to prioritize, having accurate forecasts, being able to connect your internal systems to avoid manual workarounds, and getting accurate information about customers and products, can these not all be fixed by better data governance, systems that talk to each other, and using the right data tools at the right time?

Matt: You don't need to be a distribution industry expert to figure that out, Floyd. That is 100% the issue. But let's cut them some slack, right? This is the issue in every business. So it's not just distributors. It happens to hurt them a little bit more than others because of the complexities of the catalog, the complexities of pricing rules, and customer accounts are bigger than, let's say, retail.

So it is a problem. It is a challenge for any organization. Heck, I'll give you a little insight into what I do for my day job. Believe it or not, I'm not a professional podcaster. I do go-to-market. I lead the go-to-market team here for distribution.

And one of the things I've been working on, as you know, Floyd, is building an agent that will query different sales databases within our organization to dig into what customers are buying, what they're talking to us about, looking at our CRM to find the right people, to identify the best opportunities for our sales organization.

And guess what? Connecting all of those sources is one thing, but the data inside those databases, if they're not maintained, if there's not rules, if there is not continuous attention given to it... The integrations and the systems that I put together, my slick agent just doesn't work right.

When I was running experiments on this, it was hallucinating because the data just wasn't there, and it was trying to make inferences which, frankly, I didn't tell it to make. And so here's the key. Everybody knows that AI can unbelievably enhance your sales team's ability to serve customers and drive down cost.

But if the data in those source systems is not maintained correctly, if it's not continually updated, and if those systems do not talk together, we're not going to reap the benefits of autonomous agents and the ability to put insights into the hands of those sales reps that they can use to better serve their customers.

It's a beautiful dream, but as I've often said, and you've heard me say this before, it's step two. And step one starts with understanding how to maintain data and getting it to where it can be most effective.

Floyd: Yep, absolutely. And I think you've mostly answered this question already, but if I'm a distributor, I'm looking at this report and I'm thinking, "Wow, these problems sound like my problems. What should I do right now?" It sounds like the answer is not "go out and buy an AI tool." That's step two, maybe even step four or five, frankly.

What is step one? What is the thing that you do tomorrow to start working on this?

Matt: Yeah, well, if I'm a leadership team, I need to get the leaders in the organization who are responsible for maintaining the data and get them in a room, and let's talk. Let's have a talk about our vision to empower different departments in the organization, and build a plan for executing on better data governance, better systems.

So often we skip ahead to the experience, the user experience. In this case, we're talking a lot about internal user experience, what the sales team does. But it has to start with the root problem, right? And so most of the time, distributors are not investing in the place where they should.

And if you got those people in the room... Because oftentimes, unfortunately, they're stashed away, and they don't get to the big strategic meetings. They're hidden away in the organization. Nobody really knows about them or talks to them until there's a massive problem.

So bring them out, bring them into strategic conversations, and they will tell you what they need to be successful to maintain a clean database, whether we're talking about sales data, product data, or supplier data. That's, I think, the conversation that most distributor leadership teams are not having.

They're forgetting that the people they've asked to maintain these databases are the very ones who know what needs to happen first. And I have yet to talk to one who does not acknowledge that they have work to do before their teams can reap the benefit of AI, or frankly, even e-commerce.

Floyd: All right. Maybe we'll see that 5% number go up in the next few years. But until then, I think you've earned your boating trip this weekend. Thank you so much for helping me crack open this report and figure out what's going on here, Matt.

Matt: Aye, aye, captain. Looking forward to it.

Floyd: I like that. All right, catch you next time.

Matt: All right. See you then.

Matt: Thanks for tuning in to this episode of Data Versus Commerce. New episodes drop weekly. So if you’re responsible for any part of how products get from a database to a doorstep, subscribe now on Apple, Spotify, or wherever you listen.