Wholesale Distributors up Their Tech Games to Compete With eCommerce Giants

When consumers receive a delivery from Amazon, they’ve prepaid online with a credit card.

Commercial consignment works differently. When companies deliver a large quantity of commercial products — whether it be consumer packaged goods (CPGs) or office furniture — they often have a cash-on-delivery arrangement with the customer.

“Normally, they don’t want to pay merchant fees,” Laurence Dunne, director of product management at CheckAlt, told PYMNTS. “Even if the seller was OK with paying credit card merchant fees, there would be challenges associated with it.”

Since wholesale delivery drivers’ risk management profiles require that they don’t carry cash, that means these payments are often made with paper checks.

Dealing With Paper Checks in Wholesale Deliveries

Some drivers then drive around all day with paper checks before taking them to the office. Others use commercial banking solutions to digitize the checks, but as these are not purpose-built for this use case, drivers often must enter some of the data themselves. This results in a higher risk profile, and if it’s not integrated with accounts receivable’s enterprise resource planning (ERP) system, additional back-office work.

Read more: B2B Payments: 40% Are Made With Paper Checks 

CheckAlt is attempting to streamline this with a purpose-built mobile app that lets drivers scan a check as one would do with a credit card.

Adjusting to a New Environment

Another challenge is that with the number of checks being cut shrinking by 5% every year, some companies that process them have been getting out of the business, leaving fewer options available to vendors that receive checks.

In addition, smaller wholesalers have been impacted by buyers’ shift to the large eCommerce companies. Buyers moved online by necessity early in the pandemic and are now accustomed to sourcing their goods in that way.

While smaller wholesalers can compete on personal service, they must also meet customers’ new expectations, which don’t include paying the price of the higher-cost structures of companies that still process checks manually.

To help solve this problem, CheckAlt’s solution integrates directly with an ERP system so that when a driver scans a check, it is matched to the bill in the ERP system.

“So, you don’t need that vast back office of people who are doing all of this manual work behind the scenes,” Dunne said.

Providing Supply Chain Visibility

Buyers have also come to expect the sort of supply chain visibility that they’ve experienced with Amazon and FedEx. For smaller wholesalers, there are now small business ERPs that can provide that level of assistance in answering the question, “Where is my order?”

“We are integrating with a lot of those ERP providers so that the small guy can provide the visibility,” Dunne said.

Wholesale distributors also must deal with partial payments and overpayments. For example, if goods are damaged during delivery, there might be a need for a partial payment. If a customer wants to pay for a future delivery and the current one, there may be an overpayment.

“We can accept both partial and overpayments,” Dunne said. “If there’s a perfect match, then everything goes through. If there’s an imperfect match, then you have the ability to manage that in the back office with splitting it among multiple invoices, changing the invoice amount, etc.”

Together, these capabilities add up to an opportunity for smaller wholesalers to better compete in today’s environment.

“The more they can do to provide personal service — provide the kinds of service that the Amazons cannot provide — but at the same time be as efficient as the Amazons, or at least come close to it, the more they can thrive,” Dunne said.

See also: Incorrect Billing Information ‘Creates Havoc’ for Digital Payments