E-commerce for the chemicals industry, the verdict!

Great idea, right? Yes, sure, even more now than before given the limitations presented by the COVID crisis. The future is bright for E-commerce and is considered one of the winners during and after the crisis. But will E-commerce for the chemicals industry work? The unhappy answer is “Maybe”.

The Middle Man Dilemma

 In successful e-commerce stories like amazon, ebay, alibaba; companies remove the middle man (shops/sellers) and give access to the buyers to have a friction-less buying experience where they can compare what on the market and for which price. It is after all about the convenience for the buyers since they drive the whole business model. In the chemicals sector the existing e-commerce platforms does not exactly reduce the friction but act as a middle man, they have no authority on the product/materials, no warehouses, delivery timing and planning is done in “good will” and if a customer will fail to deliver on time, the eCommerce provider will be the one under the spotlight.

Here is the problem with being a middle man:

• No control over quality yet will be dragged into quality related complaints
• No control over delivery yet will be dragged into delivery related issues and claims
• Challenges with both buyers and sellers due to the grey zone of where the eCommerce solution mandate is vs. buyers and sellers. Very high legal risks and lengthy litigation process.given the complex nature of chemicals
• Not an open market with the tools for sellers to compare prices, “live” depending on supply & demand. Possibly also higher prices compared due to overhead compared to buying directly from producer
• Several platforms are owned by chemicals companies thus competitors are unlikely to use such platforms

Possible Solution: Become an eCommerce back-end service company. The variables to sell on behalf of chemicals manufactures are too tough, you would need a huge team and budget to pull such operation. Becoming an eCommerce service company for the chemicals industry does not exist yet. A similar concept is done by companies like Digital River, 2checkout and FastSpring, those companies are specialized in facilitating for software companies a delivery system to develop and run their own web-shop, let me give you an example how this works.

Example: The moment you go to a seller company website lets name it company “X1” and find a product you want to buy. Once you press the buy button you are basically using the eCommerce provider and not the X1 website, it will still be X1 branded and the web link would be still also have the native name but in reality its not. The eCommerce provider will provide the following services on behalf of the chemicals companies who lack this know-how:

• AB testing & check-out optimization for checkout/buying/paying processes to deliver best conversion. An integral part of being an eCommerce company is to understand internet customers buying behavior and how the checkout process affects that
• Enabling multiple payment options which comes with major challenges and regulatory issues when selling Europe wide or global. The multiple payment options in general increase conversion
• Delivering wider geographical reach possibly in countries where the chemicals companies (clients) had no access earlier due to regulations etc. which is now avoided by the eCommerce provider established process and territory of activity
• Automating the sales, marketing, ordering, payment, invoicing, and shipping (only the information part) on behalf of the clients, which you as an eCommerce company would do better and take away the headache from the manufacturers who generally cant fulfill the list of requirements needed to to sell online. It is also a step forward for clients since many manufactures do not have such processes automated and thus can use your platform for that purpose
• Marketing and sales on behalf of clients via affiliate marketing and other sales and marketing activities which is an opportunity as well for you as an eCommerce company to cross sell.

Benefits of this business model:

• You as an eCommerce provider would be very specialized and will deliver value to your clients
• Order fulfillment would be done via the seller and not via the eCommerce provider, thus the friction is reduced and the obligations, risks, quality issues, returns, claims etc. are not your mandate. Since also the customers will not even see your platform because the checkout process is optimized to have the look and feel of the original seller.
• Scale-able concept and can be applied to the wider chemicals sector and all its verticals
• No current competitors
• Economies of scale are easier to achieve

Take away for chemicals e-commerce companies:

•  Don't get fixed on a specific business model, the market dictates what is needed, listen to customers, collect feedback, analyse critically and most importantly test and learn
•  E-commerce definitely has potential in the chemicals sector, the form and setup is what needs to evolve
• The COVID crisis can be used as a catalyst to show potential clients cost saving potential of using such back-end solution for automating and improving the online selling processes
• Sales & Marketing activities for the eCommerce provider as well as end clients are of utmost importance to educate the market and show results for end clients.