In the wake of the pandemic, manufacturers have expanded their sales channels to reach more customers and drive additional revenue. Some have shifted from a predominantly wholesale model and adopted business-to-business (B2B) and direct-to-consumer (D2C) channels to work directly with other businesses and consumers.

The addition of new channels opens a world of new opportunities for manufacturers, while also exposing them to potential barriers to growth. In pursuing this goal, they should be aware of three potential obstacles: a decline in customer experience, failure to scale business operations, and tax compliance shortcomings.

A Better Customer Experience 

When it comes to creating a great customer experience in all sales channels, each set of customers can have varying expectations and demands. Manufacturers can deliver what they want by creating a true omnichannel experience based on those unique requirements.

Manufacturers have optimized the wholesale or distribution business. For B2B direct, they need to think through the process and translate it to an online experience.

Consumers are increasingly favoring the ability to shop in various ways, from their smartphones and tablets to laptops or desktops, to buying in person at a physical location. Whether buying through a phone, third-party kiosk or social media page, they want the experience to be fast and easy. Part of your responsibility as the seller is to ensure that all those different channels are connected to a centralized enterprise resource planning (ERP) platform that efficiently tracks and manages inventory, customer data, promotional information and personalized offers. To make this model work, consider bringing in outside expertise or using an agency. Don't turn the project over to an IT staff or an internal resource that only knows the old style.

Your business should present a single, consistent brand regardless of how and where your customers shop for your products. An example of how a brick-and-mortar location can complement online shopping is the buy online, pickup in store (BOPIS) experience. For this to work smoothly, your ERP system must be connected to your website, delivery partners and fulfillment centers.

Scaling Business Operations

The upward trend of e-commerce across industries continues, with online retail sales surpassing $1 trillion for the first time ever in 2022. Yet with multiple sales channels and target customers, growing the business becomes more of a challenge. Manual, paper-based processes can keep manufacturers from building their customer base and scaling operations.

Outdated manual processes are also prone to human error, raising the possibility of lost sales, noncompliance penalties, and wasted time and effort. Aging technology platforms can swiftly become a liability. That’s why today’s most successful manufacturers implement tools like cloud-based ERP platforms along their digital transformation journeys — which helps businesses become more agile and responsive to customer needs and market trends.

Tax Compliance Issues 

The U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc. overruled the physical presence rule, which had previously been the standard for determining whether tax was collected. Now companies can be required to collect and remit taxes, whether the company has a physical presence in that jurisdiction or not.

Five years after the Wayfair decision, manufacturers and other businesses are still being significantly impacted by its implications. It has complicated requirements for how and where they must be registered for sales tax, where they must file tax returns, and how they manage exemptions. Even nontaxable sales can create nexus, the obligation to register as a business in that state and report tax. Any business that has met nexus thresholds must file a tax return. In B2B and D2C sales, manufacturers must consider whether they need to collect and remit sales tax.

Tax compliance is critical for every sale, whether to another business, individual consumer or wholesaler. It can be challenging for manufacturers to become familiar with the ever-changing, widely varied tax laws, not to mention added complexities such as exemption certificates and audits. Especially as manufacturers increasingly adopt B2B and D2C sales models, many will struggle with highly complex and evolving tax regulations and compliance.

The solution lies in technology and automation. Manufacturers needn’t rely on manual or paper-based processes for managing tax compliance. With an automated system, they can handle issues more quickly, with less need for human intervention. Employees are free to work on more critical tasks, and businesses can increase compliance with less effort, reduce tax risks, and be assured that they have more accurate and updated information.

As more manufacturers adopt B2B and D2C channels, it becomes critical to avoid obstacles that harm the customer experience and the ability to scale and meet compliance obligations. By implementing ERP applications and compliance automation tools, manufacturers will stimulate growth and build a base of loyal customers.

Debbie Baldwin is director of product management for manufacturing with Acumatica, and Kael Kelly is general manager of exemption certificate and tax research product lines with Avalara.