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The Amazon Effect and MyToyota

(Read the video transcript here.)



Video Transcript

Josh Bond (00:05):
Hello and welcome to this Modern Materials Handling webcast. Today we’ll explore how the latest B2B sales technologies support valuable relationships between equipment suppliers and distributors and manufacturers. My name is Josh Bond, senior editor of Modern Material Handling Magazine, and I’ll be your moderator for today’s event. When reacting to the Amazon effect and e-commerce trends, warehousing and manufacturing operations must meet the demands of new customer expectations. Forklift downtime can interrupt production and fulfillment, but a working partnership with manufacturers of replacement parts and equipment can help avoid downtime and maintain fulfillment schedules.

Josh Bond (00:44):
To help outline this sort of partnership speaker today is Nick Ostergaard, manager of eCommerce sales and operations and marketing systems for Toyota Material Handling USA. And before we begin, I want to remind everyone that’s attending to please submit your questions throughout today’s conversation. If we don’t get to your questions today, either Nick or I will get back to you by email. So without further ado, I’ll hand things over to Nick.

Nick Ostergaard (01:08):
All right, thanks Josh, and thanks for everybody attending today. We’ll talk about the Amazon effect and the changing demographic in our industry and how we can respond to that. So going forward, it’s undeniable that Amazon has created a different mindset in consumers. And then that mindset is certainly being transitioned into the B2B space affecting the forklift and the material handling industry. Simply put, Amazon has made themselves extremely easy to do business with and as consumers in our personal lives, when we have those very easy shopping experiences, we go to work and we now expect that ease of doing business to be there in a B2B environment as well. So for better or worse, Amazon has set an expectation and as material handling suppliers and manufacturers in general, it’s our job to now meet these new expectations.

Nick Ostergaard (02:02):
So there’s lots of buzz words around. Everything is around digital transformation. You can ask 10 different people and they’ll give you 10 different answers of what digital transformation means to them. Most businesses are undergoing some sort of digital transformation, some very large scale and some on a smaller level. But it’s all around the industry. And what digital transformation is really looking to solve for is we’ve always done it this way and we know that the industry and a buying demographic of the industry is changing. We as sellers in general need to change along with that. So we need to change our mindset and we need to start meeting these new expectations that are being put upon us by outside factors such as Amazon and other of more online type businesses.

Nick Ostergaard (02:48):
It’s very challenging sometimes to change, especially in a forklift industry that has seen unprecedented growth over the last decade. 2017 the ITA reported a record breaking year. Toyota forklifts again in 2018 at a record breaking year in terms of our overall sales, it’s hard to force change when you’re breaking record after record after record, but we really have to look at it from a longterm perspective and where do we want to be in five years? Where do we want to be in 10 years? And on the other side, what if we don’t change? Where will that put us in the next several years?

Nick Ostergaard (03:25):
The fact of the matter is baby boomers and even some Gen Xers, they’re retiring at a rapid rate. 10,000 baby boomers will retire today and then 10,000 more tomorrow and that trend will continue for the next 10 years. If you look at that, it’s 25, 26 million people that are in the workforce today that are out of the workforce within the next 10 years. And these are people that we’ve largely built up relationships with through our distribution channels, through face to face relationships, direct sales. These are some of the people that we’ve been selling to for a long time and we have to be prepared for those who are replacing them.

Nick Ostergaard (04:01):
And those that are replacing them are a group called the millennials. And even after millennials, we have generation Z and generation Z and millennials really do come with different customer expectations. The first thing we have to remember is, and I say we, because I myself am a millennial. We’re not kids. We actually have kids now. Millennials are 23 to 38 years old. Generation Z is behind that and we have people in high level positions that are part of generation Z coming out of college. We grew up with the internet and we respond to brands and companies differently than our predecessors did.

Nick Ostergaard (04:42):
Millennials are now the largest labor force in the United States. We’ve surpassed the baby boomers, which means if you’re just looking at it statistically, the odds are you are doing business with a millennial more so than you’re doing business with a baby boomer. You look at it from a negotiation standpoint, you’re negotiating with millennials. Millennials are also influencers and in some cases they’re also buyers. Millennials, we grew up with the internet and we really respond to utility that help not sell message, is something that resonates a lot with millennials. We don’t like to be hard sold or hard closed. We like to find useful content and find value in relationships, whether that’s online or offline. Above all, we want a really good experience. And with the digital age, if we have a poor experience, there’s more ways than ever before that we can let a lot of people know about that poor experience.

Nick Ostergaard (05:38):
We do understand that there’s a time and place for face to face communication, but when you break it all down and you speak frankly, millennials, we really do prefer online and self-serve methods. And that trend will only continue with the generation behind us, which is generation Z.

Nick Ostergaard (05:55):
So let’s step back for a minute. We can all make a little bit of fun at the millennials participation trophies and the gap year. So we can get our laughs out now. But if we look at it from a business standpoint, millennials and generation Z, we’re going to make up roughly 60% of the workforce by 2020 and we used to say by 2020 as if that was some far away time period. That’s next year. So 60% of the workforce globally will be millennials and generation Z. This generation of people are driving business decisions and the way that they conduct business is a way that we need to respond, because if we don’t capture this market, they will go someplace else. They’ll go to some someone that that can, a business that can capture their interests, their preferences for shopping. That’s what they’re looking for. Again, I say we.

Nick Ostergaard (06:51):
So catering to millennials and generation Z buyers is critical to our continued success. We are truly in a disrupt or be disrupted environment and that environment is largely around data, data allows for personalization. And then we have easy. Being easy to do business with. We can streamline the sales process and then finally speed. We can go through automation and different transformation to speed up the processes. All of this is very important to the millennial buyer. Gartner, a large market research firm has found that nine out of 10 companies now compete on customer experience alone and that’s very telling, particularly in the forklift industry because it’s doesn’t say we compete on product, it says we compete on customer experience.

Nick Ostergaard (07:45):
So that got me to thinking, how else have companies competed over time? And the Harvard business review actually came out with a pretty neat article that dove into that. Back in the late 19th century, companies started incorporating and they were competing primarily on efficiency and then they quickly moved into scale. So they’re building efficiencies with different manufacturing lines and then they’re scaling up to, “Hey, I can make this on this manufacturing line. What else can I make on this manufacturing line?” So they quickly went into scale and then around the 1980s maybe a little bit before, led somewhat by Toyota, but some other brands as well, companies really started competing on quality. And that held true going into the nineties and mid nineties a company called Microsoft came around and then they started platforming customers. And that’s really where the changes started. Microsoft started competing on network, how can I build my network as large as I can and then continue to sell to that network. It’s almost like they’re creating that captive audience for them and other companies caught on.

Nick Ostergaard (08:50):
And then from network we went into the ecosystem and the ecosystem is really about the ease of doing business and being able to be a one stop shop for all different kinds of customer domains. So customers that want to shop a certain way, you support that. Customers that want to shop at different way, you can support that too. And then you have relationships with other partners and businesses in the industry to where you can really be looked at as that one stop shop. The way the companies have competed over time has certainly changed from the beginning to where we are today to a company that’s a natural evolution of changing business processes and changing along with the customers.

Nick Ostergaard (09:35):
So again, what are we solving for? We have a lot of new people that are entering the workforce in and out of the material handling industry. New people drive new processes that demand new technology and at Toyota that’s really what we are looking for in our digital transformation effort. So we have launched our first public display of our digital transformation with the My Toyota Store. My Toyota Store, we are selling four different equipment models online. We are selling through our dealer network. In addition, we just recently launched a parts store to the My Toyota Store where you can buy Toyota genuine parts directly from our online store or shop.toyotaforklift.com.

Nick Ostergaard (10:23):
The interesting piece of the My Toyota Store is it’s not a direct sales channel between Toyota and the customer. It’s really between the customer and the dealer and it’s just a centralized place to shop for these parts and equipment. So as a customer shops online with us, they are actually transacting business with the dealer just like they always have and the dealer is using inventory that they have on hand or different distribution centers as backup just like they always have as well. The dealer picks packs and ships the equipment or the parts to the customer and that relationship is maintained between customer and dealer. It has been very important for Toyota as we go down this path to respect the wholesale retail customer relationship that we’ve built up over time where Toyota as the wholesaler continues to sell to the dealer and the dealer continues to have that relationship and sell to the end customer.

Nick Ostergaard (11:20):
What our goal was is to bring that relationship into an online environment. So companies can choose to shop in the offline channel, face to face with the dealer. Nothing there has changed. But for those people or companies that have a preference to shop online or for those companies that don’t already have a relationship with Toyota or a Toyota dealer, this is a new channel for us to build that relationship and introduce the customer to the dealer and vice versa.

Nick Ostergaard (11:51):
So we really see this as more of an omnichannel sales environment where customers can have relationships offline and online and they really merge together very nicely to create that positive customer experience. So as we look at digital transformation, as we look at all of the moving parts with commerce today, you can break it all down by keeping the customer in the center. We always have had customers that have unique buying preferences. We’ve always had to work around those unique buying preferences. This is the next iteration of that. And as a material handling supplier and as a leader in the industry, we really felt at Toyota that this is the next way that we put the customer right in the center and we leverage our industry leading dealer network to really help with that. We are building that relationship, that even stronger relationship between customer and our dealers and distribution channel to really prepare for the future.

Nick Ostergaard (12:52):
I think that Amazon has created new customer expectations. I don’t think anybody can really challenge that, but I think that our industry, we can meet those expectations. We’re an industry that typically has lagged behind a little bit, particularly with the auto industry, which we’re often compared to. I don’t feel that we’re lagging behind in this space. I think that we’re right there on the forefront with some of the other major companies, major industries that are all trying to do digital transformation, are all trying to figure out the next iteration of conducting business with their customers. And from Toyota’s perspective, launching the My Toyota Store is our first start in that. And I’m excited about what the next several years have to come. So Josh, I’d love to answer any questions that you have or your audience has about this topic.

Josh Bond (13:43):
Fantastic. We do have some questions coming in as well. Firstly, just for myself, I’m wondering who is a typical user of your eCommerce solution?

Nick Ostergaard (13:55):
Yeah, it’s a good question. We’ve had our equipment section online for about a year. So we’ve got some pretty good sample data there and we’re finding that many of our customers are brand new customers to Toyota and to our Toyota dealers. They’re relatively small businesses. But there’s businesses that in all likelihood didn’t necessarily know where to go to buy some of this equipment. So they went to Google and when they went to Google they were able to find us and we were able to make that transaction and introduce the customer to the dealer in an online environment. So most of our customers from our eCommerce website have been net new customers to Toyota.

Josh Bond (14:39):
A couple of questions here are asking what the differences are between Toyota’s e-commerce offering and something like Amazon or other third party online suppliers.

Nick Ostergaard (14:51):
Sure. And this is going to be a challenge that everyone in our industry and other industries will continue to face is how do you differentiate yourself from general marketplaces like Amazon, if you didn’t already know, Amazon business does have a material handling and even a forklift section or category where they have different parts components, parts, all kinds of different products that used to be very unique to just our industry.

Nick Ostergaard (15:17):
Amazon has recognized that the material handling industry is a space where they can go to drive incremental revenue for them. From a Toyota standpoint, our site is unique because it’s the only online source where you can buy legitimate Toyota genuine parts. There’s many websites if you Google part numbers for whether it’s a Toyota part or a different manufacturer’s part, you can Google the part number and you’ll find tons of third party suppliers of those parts. If it happens to be a Toyota part and it’s not from the My Toyota Store, it is not a real Toyota genuine part.

Josh Bond (15:56):
So another great question here. We’ve got a happy customer who says, I’ve been working with my Toyota dealer for years and they do a great job at getting me the parts I need when I need them. What’s wrong with sticking with that?

Nick Ostergaard (16:12):
Yeah, absolutely nothing. And that’s been a driving message for me personally as we’re rolling this out within the Toyota organization and our dealer network, nothing there changes. We are not trying to conquest customers from an offline channel to an online channel. We’ve been very intentional about creating what we’ll call the omnichannel sales environment where if a customer wants to and has been working directly with their dealer, that’s fantastic. That should not change. The dealer is able to provide services that simply are not available online. Dealers have that expert knowledge. They know which parts are often purchased together. They know if you’re going to be replacing this part, you should probably look at these other several parts as well. They have that institutional knowledge that over time we can continue to build out into a digital environment, but it’s simply not there.

Nick Ostergaard (17:06):
I mean you can leverage 3,500 Toyota certified technicians that are out on the road working on these trucks every day. The knowledge that they have is super valuable to customers to be able to direct them to make the right purchasing decisions. But on the flip side, if you are a customer that simply doesn’t like to talk to very many other people and they’re out there. Again, a millennial myself and I find myself opting for the live chats or email or self serve on a website all the time. We have an answer to you now, where previously we didn’t. So the online sales channel is really supplemental to our offline sales. They are very complimentary with each other, but in no way are we trying to take customers that are happy with their dealer experience and moving them anywhere else. We’re just giving customers options if they would like to go a different direction.

Josh Bond (18:04):
Right. Not trying to change the ecosystem, just trying to give that customer service experience. So you’ve got options, full omnichannel of [crosstalk 00:18:16] Fantastic. But?

Nick Ostergaard (18:18):
Oh, I was going to say, yeah and I mean it goes down to that Amazon effect. They know the kind of the title of this presentation that Toyota is certainly planning for the future and we certainly understand that more and more buyers are going to be coming to us with the expectation that we have an online sales channel for them to use. We wanted to get this out there because we’re already seeing that and into the future. I fully expect there to be more customers that are demanding that a vote was important for us to get this out there and to really provide that omnichannel environment. And I’m really excited about how we can grow that into the future.

Josh Bond (18:52):
It is very exciting. And Nick, I want to thank you for taking the time to break things down for us, and I also want to thank our attendees and our sponsor Toyota Material Handling USA. And by all means, folks in the audience, feel free to keep sending those questions. We’ll keep collecting them even though the webcast is over. And I certainly hope you’ll join us for the next webcast from Modern Materials Handling.

Nick Ostergaard (19:11):
Thanks a lot, Josh.

Josh Bond (19:14):
Yeah, thank you, Nick.

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