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UPS report finds generational buying preferences are changing the traditional industrial model.
As the demographics of industrial buyers shift, businesses must adapt to accommodate evolving customer demands and preferences by offering faster, more customer-focused services.
The third edition of the UPS (NYSE:UPS) Europe Industrial Buying Dynamics study revealed how a new wave of buyers is shaping the industrial buying landscape today.
“The rise of Millennials in the workplace ushers in a new era that challenges long-standing industry norms,” said Abhijit Saha, Vice President of Europe Marketing and Strategy at UPS. “Not only do these young, tech-savvy customers want orders delivered quickly, they are also influenced by additional services and post-sales support. Changes which have been underway since we first conducted the study in Europe in 2015 have reached an inflection point: the person-to-person salesforce-based mode of doing business is giving way to online interactions.”
The UPS study revealed four ways these new buyers are shaking up the industry.
Shifting Demographics. Thirty-eight percent of this year’s survey respondents were Millennials, an increase of 10 percentage points from 2017. This growing generation of buyers is less loyal to tradition, often preferring to conduct research via digital channels rather than contacting a sales representative. Millennials also tend to consider factors including sustainability and after-sales support over more traditional factors like quality and price. However, despite their growing influence, Millennial buyers are still more restricted in what and how much they can buy versus the more experienced Baby Boomer generation.
Shifting Procurement Patterns. Buyers continue to shift spending, purchasing directly from manufacturers or online marketplaces. Millennials show a growing preference for buying directly from manufacturers —and buying through e-marketplaces was up even more. During the past two years, European distributors saw a 17 percent decrease in purchase share to 29 percent, while manufacturers and online marketplaces have grown 5 percent and 19 percent, respectively.
Shifting International Sourcing. Robust international sourcing is on the rise. Millennial buyers say they order nearly half their products internationally – far more than Baby Boomers or Generation X buyers. Survey respondents are also willing to pay more for faster service across borders — 31 percent of respondents in Europe expect orders to arrive in two days.
Shifting Post-Sales Support. Assistance after a sale continues to be an important component of business deals. While this trend is growing across all buyer generations and product groups, Millennials’ need for improved customer experience leads 43 percent of European Millennials to indicate that they are likely to shift their business to attain better post-sales support in the next three to five years.
For manufacturers, online markets and distributors, the message is clear: Industrial buying in 2019 requires greater analysis and customization than in the past. Knowing the buyer — age, background, online preferences, etc. — now matters more and the trend is likely to get stronger as younger people join the buying process.
The study also analyzed the buying behaviors by country in France, Germany, Italy and the UK.
FRANCE: Industrial buyers in France are the most likely in Europe to buy directly from manufacturers (51% of sales), and the least likely to buy from e-marketplaces (20% of sales) – but French millennials are the most likely age group to buy from online marketplaces, suggesting future growth. While buyers in France agree with other European markets that returns are the most important service aspect, they are somewhat less likely than others to prioritize on-site services. France is the only surveyed country where industrial buyers are still more likely to use sales representatives to research products and suppliers compared to using other channels.
ألمانيا: Industrial buyers in Germany are the most price and quality sensitive in our European sample, with 63% considering price and 60% considering quality as top factors in supplier selection. Expectations for delivery speed are higher among German buyers compared to the average European buyer; 58% of respondents expect 1-2 days delivery for domestic orders and 37% expect 1-2 days delivery for international orders compared to 46% and 31% respectively. Survey respondents in Germany faced the least amount of restrictions from their employers when selecting suppliers, which could explain their higher supplier satisfaction levels.
ITALY: On most scores, industrial buyers in Italy occupy the mid-point of our European range – they are online buyers, with website and mobile app purchases their preferred buying method. Like buyers in Germany, they use e-marketplaces for around a quarter of their purchases. Buyers in Italy do place a higher value on sustainable post-sales solutions, with 57% ranking disposal solutions as important in purchasing decisions and 49% ranking recycling solutions as important (vs an average of 47% in Europe for both). Buyers in Italy also value personal relationship selling: 26% of orders across all age groups are through in-person sales either at a company site or during a sales representative visit, slightly higher than in other European markets.
UK: The UK is the most online-oriented of the four European markets in our sample. Buyers in the UK use online sources (websites and search) to research suppliers more than in other European markets, and they use sales representatives less. They use websites and mobile apps to make purchases markedly more than other markets – 25% of UK buyers mention the supplier website as their top purchasing method, compared to 18% in Italy. UK buyer preference for in-person transactions is slightly lower. They are also the buyers most likely to use e-marketplaces. And while their overall international sourcing is around the European average, buyers in the UK purchase more from the US than buyers in the other European markets, and international sourcing from all locations is markedly higher in the millennial group.
Additional findings and insights are available in the UPS Industrial Buying Dynamics executive summary, which can be downloaded at http://solutions.ups.com/gb-ibd.
The 2019 Industrial Buying Dynamics Study is based on more than 2,500 interviews with global purchasing professionals between 22 and 70 years of age who purchase industrial parts, products or supplies. The European part of the survey was conducted in four major European markets (France, Germany, Italy and the UK), with comparisons to the US and China.
1. Millennials (38% of the global survey sample) are defined as 18-37 years old, with Generation X (42% of the survey sample) as 38-53 years old, and baby boomers (21% of the survey sample) as 54 and older.
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