As Inc. points out, “Prime Day is a now-annual reminder of just how good Amazon is at selling things. In the beginning, it was just books; now it’s true of practically anything.” In fact, more than 50% of shoppers begin a product search on Amazon, even over a traditional search engine like Google. These statements should concern you – no matter what market you sell into.
“[T]o describe Amazon as a retailer is to misunderstand what the company actually is.” Today, Amazon has a hand in just about every industry: it “produces hit movies and television shows, delivers restaurant orders, offers loans, and may soon dispense prescription drugs.” And, not only is it a retailer often blamed, in part, for the record number of commercial brick-and-mortar closings (on track this year to outpace even the previous high of more than 6,000 store closings in 2008, according to brokerage firm Credit Suisse), but now also manufactures finished goods, from household goods to electronics, and competes with traditional distributors for valuable B2B customers.
Prentis Wilson, vice president of Amazon Business, recently shared that Amazon Business “hit $1 billion sales within its first year and is growing at a month-to-month clip of 20%“, with “300,000 registered business accounts…up from 200,000 at the end of last year.” The B2B-focused business unit that replaced AmazonSupply is a service designed to cater to B2B customers who may have previously purchased office supplies, janitorial supplies and other packaged good necessities (the market in which Amazon excels for B2C commerce) from more traditional B2B distributors that focused on that market. Today, however, the service is expanding its product catalog (currently offering nearly 9 billion products), customer base (expanding to include the likes of schools, universities, hospitals, medical clinics, small restaurants, construction contractors and government agencies), and pricing/fulfillment features (adding classic B2B procurement capabilities like customer-specific pricing and electronic invoicing) at such a rate that B2B distributors in all industries should be taking note – and making plans as to how to respond.
So, what to do?
Option 1: Join Them
While not likely an option for most retailers, especially larger businesses, or distributors, many manufacturers, and some retailers are choosing to sell their products on Amazon as a third-party seller. Amazon touts the success of their third-party sellers and has announced that sales from this group rise year over year and share in the success of Amazon marketing schemes, like Prime Day. The thought, for many, is that Amazon, especially with its Prime service, has captured the attention of the market to such a point that it is not cost-effective to reach customers in another way – or they use Amazon as one of many channels to reach the consumer.
However, many critics warn that sharing products from a brand catalog could possibly lead to two potential pitfalls:
- Amazon may use information it gathers about sales of a company’s products to better understand how to “weaken them as a competitor“, sometimes going so far as to introduce identical products, sometimes at a cheaper price point, and promoting it higher in search results.
- Some retailers may view the act as a threat to the existing relationship they have with brand manufacturers or distributors which can adversely affect established agreements
However, for many companies, the potential reward outweighs the risk – and those that decide to partner with Amazon should plan a strategy that includes consistent pricing across multiple channels, enriched and intriguing product content on every channel, and buying options that take advantage of the Amazon platform. Ideally, you will use Amazon’s payment and search features, but ensure that the customer is receiving the same rich brand experience that they would receive on your own website.
Option 2: Fight Them
For many companies, joining Amazon just isn’t an option, but to combat the threat that they represent requires careful planning and orchestration that begins with introspection.
What differentiates your business model from Amazon’s?
- Examine every step in the customer’s path-to-purchase to identify gaps or weaknesses and fix them. Think about how easy you are to do business with and how easy it is for your customers to purchase. B2B users want to be assisted. Sometimes the seller understands what the buyer needs better than the buyer. Offer subscriptions, financing, and packaging solutions that anticipate their needs.
- Develop strategies for leveraging your existing relationships and deep product expertise. Amazon is not always the lowest cost provider so we must address convenience, ease of shopping, explore traditional B2C eCommerce capabilities (cross-selling, up-selling, search, recommended products, etc) and mobility.
- Leverage your brand authority to educate your prospective customer. Brand loyalty is at an all-time high, and consumers want to buy from you – so long as they receive the information they need to satisfy their buying criteria. Your site should not only delight but also allow the consumer to educate themselves, compare options and easily move from education to commerce.
- Focus on ensuring that your Information Supply Chain provides customers with the content they need to make a buying decision.
For more information on how distributors can compete against Amazon, download our Industry Brief.