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In a world where digital technology is the pivot of society, SMEs in the wholesale and
manufacturing sectors are at a crucial turning point. New technologies and changing market
demands are forcing the sector to rapidly reconsider its approach. Why is digital transformation
in this sector so urgent? In this article, we present the necessary practical answers. The goal: to
adapt. In this way, we can gain a smart competitive advantage in the 2024 landscape, from
embracing e-commerce to implementing advanced data analysis.
Digital transformation pressure
The wholesale and manufacturing sector in Europe is subject to the pressure of digital transformation. Evolution can no longer occur in small steps in 2024. Companies must think from within—at a strategic level—about the impact of the digital world on their familiar business model. The pressure of digital transformation is unprecedentedly high. It is up to companies to adapt and innovate their business models, processes, and operational strategies in response to rapidly evolving digital technologies and changing market conditions. And it doesn’t stop there. The increasing competition and changing customer expectations add extra pressure.
Europe vs. America
According to research, European companies lag behind American companies in terms of investment in research and development (R&D) and the adoption of digital technologies. This phenomenon is clearly visible in studies s by The Centre for Economic Policy Research (CEPR) from 2020. Data from 2019 also show that larger companies are more driven to embrace new digital technology than smaller competitors, and that digital companies exhibit better management practices and are more dynamic.
A striking example: the European Investment Bank reported that only 46% of EU companies took action to become more digital during the COVID-19 pandemic, compared to 58% of American companies. Moreover, a larger proportion of American companies (66%) use advanced digital technologies compared to the European Union (61%). The gap between digital and non-digital companies is growing because digital companies are clearly investing more.
Competition from all corners
The next challenge on the sector’s plate is the growing competition. New digital players are
popping up like mushrooms through e-commerce. Additionally, the possibility of direct-toconsumer (D2C) business models for manufacturing companies represents a significant share
of the direct competition in 2024. D2C is a sales model where producers or brand owners sell
directly to the end consumer without intermediaries, which might bypass essential steps such
as distributors, wholesalers, or retailers—but it turns out to be a harsh reality in the sector.
The increased competition inevitably leads to additional pressure on prices and margins. In a sector where margins are often small, this is a threat that must be closely monitored. Digital tools that analyze data become vital for players working with small margins.
How does this proliferation of digital players arise? E-commerce platforms are no longer rocket science and are easy to use, allowing producers to cast their net wide without large upfront investments. Traditional companies must bravely compete with these new players who prioritize customer-centric experiences, innovation, and personalization. To remain relevant, digitalization and innovation are imperative.
Changing customer expectations
At the sector level, digital technologies are transforming the B2B market, with business customers increasingly expecting digital efficiency and customization. This forces wholesalers and manufacturing companies to critically examine customer relationship management. Providing customers with real-time insights into business processes, such as inventory and logistics, seems an essential step to keep them on board. Additionally, systems for dynamic pricing and customer-specific product adjustments are becoming increasingly important. Embracing this digital transformation automatically translates into a better position in the market segment to meet the sky-high expectations of B2B customers.
Roadmap for SMEs: 4 concrete steps
If we translate the sector’s challenges into concrete steps for SMEs in wholesale or
manufacturing, we find that this sector should focus its efforts on the following four topics:
1. E-Commerce and online presence
Like it or not: an online presence is your key to the new digital world. With a solid e-commerce platform and a digital environment that adds value for your B2B customers, a website must transcend the transactional to retain customers. From detailed product information to customer-specific pricing and a streamlined, secure ordering experience, this is a significant challenge for many SMEs. Therefore, it’s also a gap in the market—a competitive advantage worth noting. It’s a smart move to integrate these online channels into the traditional sales process. The result is an omnichannel and complete customer experience that meets all digital expectations.
2. Digital base infrastructure: ERP/WMS/CRM
Excel files are still one of the most commonly used administrative tools within various departments. However, the most high-performing companies use a more integrated system, where different tools are transformed into a unified software solution. The starting point of such a system is a digital base infrastructure. ERP systems (Enterprise Resource Planning) provide integrated business management, WMS (Warehouse Management Systems) optimize inventory logistics, and CRM (Customer Relationship Management) supports better customer relationships and sales processes. In 2024, these systems must work seamlessly together, provide real-time data, and offer mobile accessibility to gain speed in the race for the customer.
3. Data and Business Intelligence (BI)
A strategy around data and Business Intelligence will also become a key element in 2024. Systematically collecting and analyzing data from ERP, WMS, CRM systems, and e-commerce platforms provides valuable insights to focus on cost savings, operational efficiency, and improved customer satisfaction. It enables companies to act proactively and make calculated predictions for their sector. Think of better inventory management and insights into new market needs—essential elements that provide a competitive advantage over the rest.
4. Automation of business processes
Automation is the logical next step in increasing efficiency and reducing costs. By automating routine tasks, SMEs can focus more on growth areas such as customer service and innovation. AI and machine learning are no longer nice-to-haves but must-haves for companies that want to optimize processes and maintain an edge over the competition. Automation can lead to significant improvements in production, inventory management, order processing, and customer service. The start? A digital base infrastructure.
Conclusion
2024 will be an important year for SMEs in wholesale and manufacturing. Digital transformation will be a crucial phase in which adapting to and integrating digital technologies is not an option but an absolute necessity. The more concrete the actions, the better. From setting up an effective e-commerce presence and implementing integrated digital systems such as ERP, WMS, and CRM, to leveraging data for smart decision-making and automating core processes.
The goal? Staying ahead of the competition to come out as the customer’s favorite. But also to maintain margins and meet growing expectations. It’s time for decisiveness and action to stay on board.
