Digital commerce, whether through your website, via eProcurement, direct connections (EDI or tools such as Remarcable, Kojo, and others), via apps, email to ERP, or other vehicles is increasing.
Our recent State of eCommerce research, which gathered input from 350 Contractor buyers, highlighted that 62% are buying some material electronically and, based upon their feedback, projected to 30% of their business. Even if this is grossly overrated (remember, it’s a survey), so let’s say it’s 10-15%, it is growing.
And yes, there are distributors who will say “I don’t see that.” Which is correct. They will not see orders that are being ordered, electronically, from someone else … even outside the traditional electrical distribution channel!
But when major distributors publicly report their percentage of business generated electronically, it is now regularly exceeding 25%, and in the industrial supply space it is much higher.
The other argument is “this is not incremental sales.” Which frequently is correct. It is converting a percentage of business from one ordering modality to another. But, if the “new” modality represents an opportunity to reduce costs because the cost-to-serve is lower, doesn’t this increase the net profit per order? Isn’t that the key? Generating more bottom-line profit?
Sam Palomares, an Account Director for Big Commerce, coincidentally had a LinkedIn posting on this article that was interesting. Why is it interesting you ask? Because eCommerce salespeople inevitably talk about how eCommerce is going to increase your business which, in my opinion, is naïve and highlights that they do not understand distribution’s business dynamics. There is much more that goes into why an electrical buyer purchases from a distributor than “do they have a website.”
I asked him to expound upon his thoughts in this article, on digital order profitability metrics. Essentially, it is all about Cost-to-Serve.
Digital Order Profitability Metrics
Most experienced operators will tell you: profit isn’t made in pricing. It’s made—or lost—during the work it takes to deliver. The labor. The freight. The follow-up.
And when orders come in digitally, that work often gets hidden.
Web portals and mobile quotes can be helpful. But if you’re not watching the work behind the scenes, they might cost more than you think.
That’s why cost-to-serve (CTS) matters. It helps you track time, labor, inventory, and freight. It also shows if you’re making money on the orders that keep your team busy.
I built this dashboard after talking with operators and listening to podcasts like Wholesale Change and MDM. It’s made for electrical distribution; with clear signs you can measure and act on.
Cost-to-Serve (CTS) Dashboard for Electrical Distribution
This dashboard shows where digital helps. And where it adds hidden cost.
|
Category |
Key Question |
Why It Matters |
What to Measure |
|
Labor efficiency |
Is digital saving time or just shifting work? |
Shows if digital frees up your team |
Orders per rep and counter staff across all channels |
|
Order friction |
Where does manual work still show up? |
Reveals weak spots in your digital process |
% of digital orders needing human help |
|
Pricing complexity |
Are price rules holding up? |
Flags when reps still have to fix pricing |
% of digital orders with overrides |
|
Workflow issues |
Where is digital creating extra work? |
Exceptions lead to delays and frustration |
% of digital orders with freight, tax, or credit issues |
|
Revenue quality |
Which digital buyers bring profit? |
Not all buyers are worth the same |
Net margin by digital buyer type |
|
Fulfillment health |
Where is delivery hurting trust? |
Bad fulfillment breaks confidence in digital |
Partial fill rate for job-site digital orders |
|
Inventory exposure |
Is stock going to low-return buyers? |
Ties up working capital with little return |
% of stock held for digital-only low-margin accounts |
|
Cost per order |
What digital habits cost the most? |
Some frequent orders lose money |
Cost per digital order by customer type |
|
Digital ROI |
Is digital saving cost or hiding it? |
Only counts if it reduces real effort |
Cost to serve: digital vs manual |
Why This Matters Now
Margins are tight. Labor is hard to find. And everyone wants more. Faster quotes, better stock info, and job-site delivery by morning.
CTS helps you deal with this. It’s not about cutting service. It’s about making sure your time, tools, and effort are used where they help most.
Real Examples You Might Recognize
- A 12-line order comes in late, but needs to be at the job site by 7 a.m. It touches your night crew, your driver, your rep—and maybe gets repriced too. That order isn’t bad, but it’s not cheap.
- A showroom return doesn’t go right back on the shelf. There’s freight, damage, and cleanup. And your team is stuck in the middle.
- A “digital” quote still needs review, emails, and a pricing fix. That’s not online ordering. That’s manual work with a digital face.
How to Use CTS Insights
- Group your customers – Look at electricians, GCs, OEMs, showrooms. Compare how much they take versus how much margin they bring.
- Spot the drag – Some customers place a lot of orders but still hurt margin. Use CTS to find them.
- Set better rules – Use what you learn to change delivery minimums, return rules, or override steps.
- Use digital where it helps – Don’t push digital commerce for its own sake. Use it to save meaningful time and take low-value tasks off your team’s plate.
Bottom Line
You run people, trucks, service, and now digital. You don’t need buzzwords. You need tools that protect your team and your margin.
Use cost-to-serve measures to show you which efforts are profitable, and which are not.
Sam Palomares is an Account Director at BigCommerce. Channel Marketing Group researched and wrote the State of eCommerce report which shares input from 350 electrical buyers. The report can be requested at www.ecommerce4distributors.com.
Thoughts
- Distributors often ask, “I know I need to invest / continually invest in eCommerce but how should I measure “success” or ROI?” We often talk about the metrics that marketing likes (i.e., page performance, visitor activity – Google definitions) or sales performance (which is expected) but it is anecdotal as cannot define as “incremental.” Channel Marketing Group also offers an eCommerce CSI tool. Sam’s take on Cost-to-Serve is another model to consider.
- Ask your eCommerce team, or your operations team, or your analyst how you can begin to extract, and monitor over time some, it not all, of the metrics mentioned.
Rarely, if ever, will customers do business with you solely because of your website. Remember, the business is about profit, overall and at each customer. Measuring key operating costs metrics is important.
And if your eCommerce salesperson, or “partner,” doesn’t understand the business, recognize that you are just buying, and sometimes “renting” (because you can always change it). Your team needs to be educated on the business drivers and profit levers. Otherwise, the investment is an expense.
Which of these metrics are important to you? Or what would you add? Or maybe the better question is, “are you measuring any of these solely on eCommerce / digital orders?”
And lets put the question out to Sam, and/or BigCommerce – which companies are you working with, regardless of industry, that use these types of metrics?
As always we appreciate your comments and questions, so please feel free to reach out to me.
