Who doesn’t love a great American success story? Especially when it’s a small manufacturer.
A few years back I had the pleasure of leading VersaTube, a Tennessee-based, 25- year old manufacturer of DIY steel building kits. They are a proud American business – operating out of three U.S. plants and purchasing steel exclusively from U.S. suppliers. When VersaTube asked me to join, they were at a crossroads. Their traditional way of selling was no longer working and they needed someone to guide them. In this, they asked me to address three key issues:
- Most sales were from a small group of dealers and mass merchants; they were concerned about the risk of putting all their eggs in one basket.
- They were dissatisfied with how their dealers promoted and sold VersaTube’s products.
- They needed to reduce expenses and selling direct showed promise for improved margins.
Admittedly, I started working with VersaTube because they wanted an online sales strategy. They recognized that their buyers were already shopping online, and knew this channel would continue to grow and change the way all manufacturers sell. VersaTube wanted to be one of the first ones in its industry to adopt this model.
A Digital Transformation
The first thing my team at BITCADET (the agency responsible for VersaTube’s transformation) did was map out VersaTube’s customer’s buying journey. Using this understanding, we rebuilt their website by creating an e-commerce platform with an online configurator that connected sales and engineering to give customers real-time pricing. This shortened the lead times for customers, decreased the workload for staff, and increased cash flow and sales for VersaTube.
To accomplish this transformation without overextending the budget, we used open-source software. Similar to Google or Facebook’s engineering teams, we incorporate thousands of lines of open source code into our client’s platform - saving them considerable development and licensing fees while giving their teams the functionality, scalability and security they expect.
And then the pandemic hit.
DIY steel building kits may seem like an odd thing to sell online – but with COVID-19, we helped VersaTube target buyers who were rushing to tackle home projects that had moved to the top of their “to do” list. With their e-commerce channel and online configurator already established, VersaTube’s sales skyrocketed and before they knew it their products were back ordered in all three plants.
VersaTube’s sales grew 1,000 percent by establishing a direct-to-consumer sales strategy. Direct online sales went from five percent to over 60 percent of annual revenue. They are capturing higher margins while getting paid upfront.
We transformed how the company targets and processes leads, created a world-class lead generation and e-commerce platform, and used innovative digital marketing strategies to lower customer acquisition costs.
Many U.S. manufacturers are incredibly innovative when it comes to process and equipment investments on the factory floor, yet lag 10-15 years behind when it comes to investing in sales and operational processes.
Two frequently noted reasons for this delay are an unwillingness to challenge established sales processes and a history of expensive IT projects that either failed or did not yield the expected returns. While both perspectives are relatable, they each demonstrate a key missing ingredient: a lack of building comfort and confidence in employees throughout the change, commonly known as change management.
An overwhelming amount of U.S. manufacturing sales processes are manual. It’s engrained in employee culture, and often how sales and administration processes have worked for over ten years. To ask employees to adapt to a new way of doing their job (using new technology) is stressful as people are inherently resistant to change.
For a new system to work well, it requires buy-in (and hopefully excitement!) from employees. We work carefully with a firm’s team to help them understand the reason we are changing a process, how this change will help them and their teammates, and equip them with the training and resources needed to prevent them from returning to the old manual process. This is critical for any transformation to occur and we encourage our clients to make it a priority.
Why Is It So Hard to Go Digital
The end answer is always the same: fear. The fear of change, fear of losing revenue, and fear of potentially jeopardizing relationships with dealers/distributors tends to paralyze forward thinking solutions.
Ironically, manufacturers are not looking out for the real risk and reason to be fearful – becoming obsolete by others willing to take the chance on technology. The customer’s buying process is changing for both B2C and B2B markets because the buyers for vendors, dealers, and distributers are now millennials with less brand allegiance.
Manufacturers in Asia have been quickly capitalizing on this change to game the market and drive out American competitors; now is the time for American manufacturing to make sure they are selling their superior products to customers in the way they want to buy.
The benefits simply outweigh any risks. According to Digital Commerce 360 -- in 2019 U.S manufacturers’ B2B ecommerce sales grew by nearly 21 percent to $430 billion. That growth rate is nearly 20 times faster than the growth in total U.S. manufacturing sales.
The lack of supply chain transparency and inability to keep up with demand has created serious problems. Companies with digitized operations have taken the lead and are experiencing record growth. With the pandemic comes new rules for selling since in-person sales calls, demos and trade shows, and conferences are indefinitely on hold.
VersaTube’s story is a powerful reminder that you can create an alternative sales channel without jeopardizing traditional sales processes. No two manufacturers are alike, but if your customers are already online, why wouldn’t you be there, too?