Companies like Amazon and Netflix use cutting-edge Artificial Intelligence (AI) tools to drive massive growth and disrupt business-to-consumer (B2C) markets. Distributors have been slow to adopt this technology, but change is coming. B2B distributors that leverage the power of AI have the potential to turbocharge revenue and disrupt their own markets. Those that fail to do so will risk getting left behind.
Distributors today must understand what AI is and how it can be used. Broadly speaking, AI is any form of intelligence demonstrated by machines. AI programs analyze aggregated data and perform specific tasks. The more information they have, the more effective they are at their assigned jobs.
Many people benefit from this type of technology without even knowing it. Daily conveniences such as email spam filters, mobile check deposit and voice recognition are all made possible by AI.
But where AI technology is useful for individuals, it is something of a kingmaker for businesses. Amazon uses AI to power its recommendation engine, a tool that generates 35% of the giant’s e-commerce revenue. The world’s most popular video game, Fortnite, relied on AI to attract players (250 million of them) and profits ($3 billion in 2018). And, Netflix uses AI to keep 148 million paid users hooked on its service.
Amazon, Fortnite, and Netflix are massive by traditional standards, but they’re not actually that unusual in today’s landscape. AI creates cycles of positive momentum, so when companies employ AI successfully, they grow exponentially. When subscribers watch Netflix shows, for example, the streaming service collects data on viewer preferences, allowing it to refine its recommendations and produce better programming — all of which lead to more viewed shows, more data, and more subscriptions.
The two key takeaways here are that many different businesses — including distributors — can benefit from AI, and that the technology becomes more effective and more accurate when fueled with more data.
AI will positively impact distribution in three key places: at the point of sale, throughout the supply chain and within internal processes.
First, AI will allow distributors to evolve from order takers into order makers; that is, smart technology will identify patterns in customer purchases to make product and next-action recommendations based on data (this can be very powerful; remember, Amazon’s search recommendations generate 35% of sales revenue).
With the support of AI, sales reps and e-commerce sites won’t just take orders, but will actively offer customers products that they are more likely to buy. AI will also track and encourage regular reorders. As data points — purchases, clicks, and views — accumulate, AI will provide customers with more personalized, proactive shopping experiences and distributors with more revenue.
My company, proton.ai, uses AI to increase sales for distributor in exactly this way; and even though AI only gets better with time, our early results have been fantastic; We’ve increased the average order volume generated by customer service reps by 20%, beaten existing product recommenders by a factor of 10, and multiplied revenue per product pitch by 1300%.
Beyond the point of sale, distributors can also use AI to drive secondary and tertiary benefits. Data does not only reveal what customers buy, but when and where they buy it. AI will identify when specific products should be sent to certain distribution centers and when perishable products should be promoted to reduce inventory waste. In short, the AI-equipped distribution manager will be able to optimize inventory and supply chain management.
Third, AI technology will shape the internal improvement of distributors. AI will not replace workers, but it can guide personnel decisions, make accurate financial predictions and contribute to the development of new software.
There are many positive impacts that AI will have on distribution. However, one critical caveat must be noted: Time is of the essence. Distributors currently have a big leg up on would-be disruptors in the form of information and time. AI runs on momentum, and in the AI world more data points mean better customer experiences, which means more data points. Right now, distributors have an information advantage. However, if they want to keep the data (and thus the customers) in the future, they’ll need to embrace AI and make the data start working for them.
Originally published at https://www.linkmagazine.com/ in January, 2020.