How Can Members Compete Against Amazon Business?
Three years ago, I wrote an article on “6 Ways Members Can Beat Amazon in Online B2B”. I thought it would be worthwhile to see how my advice held up.
The Launch of AmazonSupply
Amazon ventured into B2B sales in April 2012 when it launched AmazonSupply with 500,000 products targeted at industrial contractors, sanitation workers, plumbers, and other labor-intensive jobs. In 2015, AmazonSupply was replaced by Amazon Business, a new marketplace featuring hundreds of millions of products, bulk discounts, and free two-day shipping on orders worth more than $49.
Amazon promised to “change the world of procurement” by simplifying the purchasing process and continuously expanding their product selection, and adding more and more tools and features to their B2B platform.
In 2022, Amazon B2B sales reached over $25 billion.
And they are still evolving. Amazon has expanded their free shipping. They are using artificial intelligence and machine learning to better match products to customers. They have a massive product selection at competitive prices.
Perhaps most alarming for competing distributors, Amazon’s B2B customers no longer have to use Amazon’s online applications to place orders. Amazon Business has developed APIs to connect their customers’ software directly to Amazon’s product catalogue. Not only can customers order direct from their own ERP systems, Amazon’s APIs can set up automatic re-ordering of product once they reach a minimum threshold.
How are independent distributors supposed to compete with that?
Traditional advice focused on building a “moat” around your distribution company to keep Amazon Business at bay.
- Dominate a specific vertical by offering a comprehensive selection of products with lower prices and better product transparency.
- Emphasize customer service, both online and offline, and serve the small, irregular customer whose purchases add up.
- Safeguard the complex sale that Amazon could not offer.
Buying groups could help their members dig this moat by providing rich marketplaces, product information, and data analytics.
Like a medieval castle, distributors would be safe behind their moat.
This strategy forgot one thing.
Amazon is a technology company.
Amazon has the money, resources, and capacity to bridge any competitive moat over time. For example, Amazon Business launched its Custom Quote Engine for complex orders. Their interfaces can support customized products. Their shipping options are targeting smaller and smaller customers.
So how do independent distributors compete?
Distributors need to stop competing with Amazon Business and start competing like Amazon Business.
Instead of thinking operationally, distributors must think strategically about customer experience. Today’s B2B consumers look for convenience, selection, and competitive prices. Mostly Millennials, they have grown up with the convenience of online B2C shopping and expect the same features in B2B.
Use data like Amazon does.
Capture and document every action taken by every customer during the purchase-to-pay process. Use that data to create a 360-view of each customer’s commerce experience in order to optimize and customize their experience.
Provide deep product information, including the practical tips and tricks that only come from hands on selling. Master the upsell and cross sell online.
Listen to customers. Find out what they want and give it to them.
What is the buying group’s role in all of this?
The role of the group is to do for the many what the individual cannot do for itself.
Members can’t compete with Amazon. Groups can.
The tools needed to compete like Amazon can often be out of the reach of individual members. Buying groups can provide access to technology such as e-commerce marketplaces, product information management systems, AI and ML tools, and training platforms. Groups can develop partnerships with financial institutions to support more favorable buying terms for end customers. Groups can enrich product data and distribute it to members to maximize their online sales.
Most importantly, buying groups can collect, aggregate, and analyze data across its membership. Groups should be first and foremost be in the data business. Data analysts need to replace rebate clerks. Data – both purchasing data and sales data – needs to be shared openly among members so they can devise their own strategies.
Groups, and their members, need to practice continuous innovation. Groups with a bias for action will succeed.
Those stuck behind a moat will not.
Written by Steve Seguin
LBMX offers a business-to-business marketplace platform, helping independent businesses, their buying groups, and suppliers buy better and sell more. Its Private Group Marketplace for Groups has transformed billing and ordering, rebate management, real-time analytics, e-commerce and product information management across the building materials, HVAC, plumbing, sporting goods, industrial supply, manufacturing, and agricultural industries. Its LBMX Supply Cloud platform allows suppliers to look at their industrial distribution customers through one lens, offering full EDI, PIM, Analytics and Payments.