The buying and selling of aircraft parts will go from person-to-person transactions to digital marketplaces where everything can be found within just a few clicks. It’s not a question of if this will happen, but when.
Looking at wider trends, it’s coming sooner than many in the aviation industry may think.
The global consultancy McKinsey reported earlier this year that B2B e-commerce is growing “at astonishing speeds”. Nearly two-thirds of B2B companies across all industry sectors were offering e-commerce capabilities in early 2022, a 12 percent increase in just one year. In fact, B2B sellers are now more likely to offer e-commerce channels than in-person selling. Why? Because that is clearly what customers want.
The McKinsey report found that two-thirds of B2B customers intentionally opt for digital solutions when they are available. No wonder the sellers surveyed by the consultancy said that e-commerce is now their most effective channel, outpacing in-person sales, phone calls, emails and other means.
And buyers aren’t just using e-commerce platforms for small, repeat purchases. More than three-fourths (77 percent) of US-based business buyers told McKinsey that they are comfortable spending $50,000 or more in a single digital transaction. Thirty-five percent that said they’d have no problem making purchases that exceed $500,000, while 15 percent said they’d even make single purchases for more than $1 million.
Research from the e-commerce company Mirakl, whose industry-leading software powers the Satair Marketplace for new and used aircraft parts, found similar proof of the ongoing e-commerce revolution. According to Mirakl’s B2B Online Report, digital marketplace sales grew 8.5 times faster in 2021 than total manufacturer and distributor sales. The report concluded that digital marketplaces are now the most-used B2B sales channel, used by a full 87 percent of sellers. That’s more than reported using a traditional request for proposal (RFP) process or personal interactions.
It may be around now that some readers will think, “Well, that’s great but it would never work in aviation.” Wrong. The notion that digital marketplaces couldn’t possibly work in aviation is one of the five myths addressed by the McKinsey report. It’s not just our industry that can be sceptical. A number of B2B companies told McKinsey that “customers aren’t ready” for digital solutions and “e-commerce is an immature space for businesses like ours”. Sound familiar?
Allan Uldahl Riis, the Director of Commercial Strategic Programmes at Satair, said that digital marketplaces aren't just a future solution for the industry. They're already here and helping address some of the changes brought on by the Covid-19 pandemic.
“Many buyers and sellers of aircraft parts have had to really change their traditional ways of doing business. The entire supply chain is more responsive than it used to be and digital marketplaces can connect buyers and sellers in a way that clearly benefits both,” he said.
On the buyer side, many airlines had to reduce their parts inventory due to limited cash flow and are now finding and purchasing parts only when they’re needed rather than always having them on hand.
Sellers, meanwhile, went from holding on to parts until they had a surplus that could be sold off in bulk to selling the parts individually at higher margins for a much-needed cash infusion.
Riis said neither buyers nor sellers are holding on to stock like they used to, so a lot of the traditional buffers are gone. That means both sides need a “digital middleman” of sorts that can easily connect them.
“In our industry, there are a lot of parts that buyers are never going to buy just to have on hand in case they might need it someday,” he said. “But when they do need it, they need it now. That’s why the digital marketplace is such a good idea for aviation. Buyers can get the parts they need when they need them, knowing that all the certificates are in order and that they are getting a fair price because it’s so easy to compare sellers. And for sellers, their potential buyer base is suddenly exponentially larger than it used to be and they can gain insights into the market that will allow them to maximise their profits.”
The McKinsey report warns that B2B companies need to “lean into e-commerce or be sidelined”. We couldn’t agree more. With all of the manpower and institutional knowledge that was lost during the pandemic, the aviation industry can simply not afford to go back to the old cumbersome ways of buying and selling parts through personal contacts. Digital marketplaces are the answer and the sooner the industry understands that, the better.
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This blog is driven by Satair Marketing & Communication with input from both internal and external contributors.
Satair is a world leading provider of aftermarket services and solutions for the civil aerospace industry. Satair is a stand-alone company and Airbus subsidiary.