Members Can’t Beat Amazon; Groups Can (Part 2 of 3)
B2B eCommerce Stakes Are High
Global B2B eCommerce sales are predicted to reach $3 trillion by 2024. Independent distributors, largely, have come late to the game, and their dual strategies of digital innovation and acquisitions are failing against the platform business model used by Amazon and others.
As described in part one of this article, the key to competing with Amazon is understanding their business model. Amazon’s platform allows Amazon to focus on selling a relatively small number of high volume items while leaving the rest to other suppliers on their platform. This model creates unprecedented depth to their catalogue of products while driving higher margins.
Individual distributors cannot compete with Amazon’s catalogue depth or create their own platform.
Sales Cooperatives To The Rescue
The idea of a Sales Cooperative is to take the notion of “one member, one vote” from the purchasing realm and apply it to selling online. Distributors in various industries could join together in a jointly funded initiative that can beat Amazon at the B2B game. Independents could leverage their strengths – services, customer relations, and product knowledge – in a way that Amazon could not.
Amazon is a generalist B2B marketplace. Given the size and fragmentation within B2B distribution industries, an opportunity exists for vertical-specific marketplaces. Groups – whether Purchasing Co-ops, Buying Groups, or Sales Co-ops – can take Amazon’s recipe for a marketplace and turn it to their members’ advantage.
It’s important to remember that a marketplace is not just a piece of technology. A marketplace is a business model. It creates value by bringing together distributors and consumers. Scale comes from growing an external network.
Building A Niche Marketplace
Adapting the purchasing co-operative model to build a marketplace would allow individual distributors to leverage their numbers and achieve an economy of scale necessary in the creation of a national marketplace. The Sales Co-operative could provide the technology and the staff to maintain the platform. It could gather the product information needed to populate the marketplace. It could drive the high standards necessary for such a marketplace to be competitive.
Most importantly, individual distributors could still compete against each other based on their own strengths, but on a level playing field.
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.