Master B2B’s 2024 State of eCommerce Report surfaced a consistent theme from B2B executives: constant pressure to drive digital growth by acquiring new customers and raising the lifetime value of existing ones. As practitioners refocus their commerce strategies, two questions keep coming up. How do I maximize growth from existing digital efforts, and how do I grow by expanding distribution of products I already carry? The answer in both cases runs through the long tail. Drawing on interviews with more than a dozen practitioners, this report lays out five keys to turning slower-moving SKUs and lower-traffic distribution points into meaningful growth.
Key 1: Weigh the three factors behind a long-tail strategy
A Boston Consulting Group study found a familiar 20/80 split. The 20% of products that get 80% of the attention from sales and management accounted for only half of company profits. The other 80% of products, the ones that are under-serviced, hold a real profit opportunity for companies willing to invest in them.
Capturing that opportunity means weighing three factors together: the volume of units sold, the collective effort required to sell them, and the profitability of selling through each channel. One digital commerce executive at an auto parts manufacturer and distributor described the balancing act.
Our dealer network is expected to keep inventory on a subset of our products that happen to make up 20% of our total SKUs, but 60% of our SKU unit sales. From a dollar perspective, though, the revenue opportunity is small. The slower moving long-tail parts we manage in two ways. If we’ve sold it within the calendar year, we’ll keep it in our distribution center. If not, we’ll rely on our supplier to drop ship it.
Digital commerce executive, auto parts manufacturer and distributor
In short, a long-tail distribution strategy comes down to three separate factors: revenue, the velocity of inventory turns, and the profitability of the products.
Key 2: Embrace both marketplace models to expand assortment
A marketplace lets a company offer an endless aisle, a far larger assortment without paying to store and manage the inventory. Many B2B companies hold back over channel conflict concerns. A second model, the bottomless bin, adds backup suppliers for SKUs you already sell, so an order still ships when the primary seller runs out of stock. As a beverage distributor executive put it, you are better off earning some margin from a third-party seller than losing all of it on an out-of-stock.
Backfilling your own products does not mean giving up control of price or experience.
Marketplace operators have more control over price and customer experience than they often realize.
Daniela Jurado, North America Executive Vice President, VTEX
As the operator you set the price and can run a buy-box model where the buyer selects the product rather than a specific seller. You also decide who wins the buy box by factoring in shipping and service levels. One practitioner noted that holding an authoritative position, built on having the best content, is a strong place to extend a product’s availability, because no one else tells your story as well as you do.
Key 3: Avoid channel conflict by accepting that it exists
Talk of building a marketplace or broadening distribution raises the specter of channel conflict, which usually translates to a single question: why would we sell the same products at different prices in different channels? There are sound reasons to do exactly that. Geographic markets face different local competition, service levels vary, and the size of a customer or the mix of products and services they buy can justify different pricing.
A large automotive parts distributor framed it directly. Conflict is inherent, and that does not make it good or bad. Fulfillment costs differ between suppliers, relationships matter, and some dealers sell profitable services on top of low-margin products, so they can charge a little less. The price differences simply need to make sense to customers.
The price isn’t always going to be the same in every channel, but we’re not going to compete against ourselves or our partner.
Digital executive, technology manufacturer and distributor
That executive keeps special pricing behind a login and advertises only MSRP publicly, so the company never competes against itself or its partners.
Key 4: Build the strategy on normalized data
Dirty data comes up in nearly every Master B2B session. There is one place where it is a genuine showstopper: long-tail distribution. Whether you are adding suppliers for a bottomless bin, running an endless aisle, or expanding distribution, you have to ensure that what you call “Widget ABC” is what everyone else calls “Widget ABC.” As one executive at a midsized hardware parts distributor said, the trick with the long tail is normalizing the data and tying one part to similar parts.
Normalized data also lets you capture demand for competitor products. One HVAC manufacturer generated sales by making sure a search for a competitor’s part returned equivalent parts from its own catalog. A digital executive at an enterprise IT products company described the constant work of reconciling their own SKU numbers with the manufacturer’s and the supplier’s numbers.
That executive said normalization only scales when you answer three questions first: how is a product normalized to enter the marketplace, how does your customer view it, and how does your supplier see its product and inventory. All three constituents matter, because there is almost no way to scale a long-tail strategy without a foundation of normalized product data.
Key 5: Enforce service level agreements to protect the customer experience
A common worry about adding suppliers or distributors is losing control of the customer experience after setting expectations for shipping speed or service response. Expanding partners does not require giving up that control, but it does require clear communication and holding partners to higher standards. A beverage distributor executive described keeping Service Level Agreements with retailers and enforcing clear guardrails when retailers fall short.
They’re still buying from you, even if it’s fulfilled by someone else.
Beverage distributor executive
Their approach is to track fulfillment and quality scores and feed that data back into buy-box decisions on their own site. Delivering on that promise takes a technology investment to show delivery times even when another partner fulfills the order. As VTEX’s Jurado noted, the more information you give customers at the moment they buy, the higher their satisfaction. As one midsized HVAC distributor executive put it, price is often not the deciding factor. Customers go with the partner they trust to fulfill quickly, not the one promising the absolute fastest time.