A lot has happened since we last addressed the Amazon Problem in this blog. The eCommerce giant acquired Whole Foods, opened an automated brick-and-mortar store with no cashiers, and has announced plans to build another headquarters somewhere in a major city around the country.
While these leaps may not affect you directly, they ensure one thing: Amazon is still growing successfully and in areas we might not have thought possible before.
By now, you’re aware that Amazon, and specifically Amazon Business, might be doing some damage to your distribution business, but let’s pinpoint exactly where.
Last time, we covered this issue mostly within an HVAC capacity, but we’re seeing Amazon’s influence throughout almost all of the industries we speak with. So, whether you’re distributing building supplies, electrical products, HVAC equipment, or automotive parts, you might be experiencing one or all of these difficulties.
1. Dominating the Future of e-Commerce
From a B2C perspective, Amazon has a pretty serious grip on the e-Commerce world. Many of us go to Amazon for pretty much anything we need before going anywhere else. But has this translated to the B2B world? Have your buyers started to see value in buying online rather than in your dealerships?
While some of the above industries have been slower to adopt the eCommerce trend, some studies suggest that “the number of buyers who make the majority of their B2B purchases online is expected to double within the next three years from 30% to 60%.”
That could mean trouble for distributors who are slower to invest in their eCommerce solutions.
While you might not be too concerned right now with how much your buyers care about an eCommerce solution, the average B2B buyer is getting younger. A younger buying audience means more tendency to shop online.
We’ve been seeing a lot of debate within the above industries about the costs vs. benefits of having an eCommerce solution.
Your industry might rely on relationship building to establish long time customers. Chances are these customers won’t be swayed by an eCommerce solution because they like to come into the dealership and physically order their products. On the other hand, many buyers may see a benefit of cross checking inventory and pricing on a website before they come in and make their purchase.
Where you definitely have the advantage over Amazon for now, however, is in shipping. Amazon’s imprecise shipping capabilities are fast for most products but can’t compare with your on-site shipping.
Whatever side of the eCommerce debate you lie on, though, one thing is for sure. The distributor that ignores the problem will be left behind.
2. Providing Another Avenue for Manufacturers
One common fear of many distributors is being cut out of the channel. Manufacturers are always looking for more efficient ways to sell their products, but we’ve found that the healthiest and most successful sales model for manufacturers is one that includes the whole channel.
Whether manufacturers are trying to cut you out may be another story, but the truth is Amazon is now a very viable avenue for manufacturers to get product out.
As one article states, manufacturers could use Amazon as a search engine, or focus on one SKU at a time for certain product pushes, and even get to know their customers better.
Luckily, there are a few things that distributors can do to add value before a manufacturer starts relying on Amazon over you.
One value-add, for instance, is a short-term or special promotion. The programs are perfect for pushing certain products and capturing end-user information for a manufacturer.
Outside of incentives, there’s a lot that you can do to bring value to a manufacturer over what Amazon brings. To use the above example, there’s always the superior shipping benefits. Additionally, you can help to be a better business partner by providing them with insight into your/their buyers, which more often than not will be one of their main priorities in today’s market.
You can even utilize your sales team to give product feedback. How is a certain product selling and if you changed anything about it would it sell better?
Remember that there’s always a human element that you’ll have over the giant of Amazon. Take advantage of it.
3. As Always, Pricing
It’s been a long-sung tale, but pricing is probably the most tangible pain that Amazon Business brings to B2B distributors.
What’s particularly daunting about Amazon undercutting pricing comes straight from an article from last year, saying, “if Amazon Business only commoditizes a handful of small, high-margin items, it can severely impact distributors’ net profit margins even as their overall revenues stay high.”
What this equates to is a serious affect on custom pricing for larger orders, where most margin comes from for distributors.
As we all know, however, price battles are often a fight no one wins. So, the question falls to, “What can I do to compete against pricing?” To this, I will give you the same advice we gave in our last piece.
You need to add value, not only to your own business, but for your customers and business partners as well. You have the ability to improve your business by improving the business that your resellers, dealers, and customers do. Become a valued partner to them and you will inspire loyalty that will beat out Amazon every time.
Your own particular sect of value is dependent on what you bring to the table. What differentiates you from not just Amazon, but from your competitors as well.
While Amazon might be disrupting your industry market, their algorithm is not an expert in building supplies or automotive aftermarket or electrical fittings. Find the gaps that Amazon does not fill: shipping, relationship building, industry expertise, and capitalize. This strategy, coupled with your ability to inspire real loyalty, will be your differentiator.
Interested in what you can do to stay ahead of the game? Contact HMI at 888.220.4780 to learn more about how you can add more value to your business.