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Amazon Business Is Growing. Do Distributors Have a Plan?

Distributors have two clear paths: go it alone and compete against Amazon in e-commerce, or partner up with the retail giant and sell through its B2B marketplace.

By Suchit Bachalli

Last year, Amazon Business, the B2B sales division of Amazon, surpassed $1 billion in annual sales and claimed more than 300,000 registered corporate buyers. Distributors are well aware of what this growth could mean for their businesses. In a recent Unilog survey, 33% of distributors felt that Amazon Business is the greatest threat to their businesses today — the number one response on the survey.

But while many see the threat, most are not prepared for it. A shocking 52% of the survey respondents said they don’t have a strategy for competing with Amazon Business, compared to 22% that have a strategy, and 5% that already sell on Amazon.

Distributors have two clear paths laid out before them: go it alone and compete against Amazon in eCommerce, or partner up with the retail giant and sell through its B2B marketplace. There is no one-size-fits all solution — each distributor must follow the strategy that works best for them. But what is clear is that distributors need to pursue their strategy as clear-eyed as possible, weighing the pros and cons of each option. Here’s what they should consider.

Domain expertise. Amazon’s overall plan is to use its scale to accrue data and use those insights to recommend what to sell. The entire model is predicated on the idea that buyers know what they want. But that’s not true of every single buyer, and this is where distributors have a massive advantage. They have two things Amazon lacks: domain expertise and customer history. Distributors can leverage buying habits and customer relationships that go back several years, allowing them to make recommendations on products usually purchased together, or that a buyer often includes in an order and forgot.

Domain expertise allows distributors to ask their buyers why they are making certain purchases, and then recommend changes or additional products based on the answer. It also helps distributors develop more detailed product content for their e-commerce sites than what Amazon can offer, resulting in a better customer experience.

Data. Whether distributors know it or not, customer order history is data. It’s the kind of data that helped Amazon leave behind its bookseller roots and become the e-commerce giant it is today. When distributors sell directly through Amazon, they forfeit this data. Amazon Business’s ability to market, sell and ship products for distributors — at only 15% off the top — seems like a great deal. But losing that customer data cuts a distributor off from their buyers, and that could be harmful in the long run.

I’ve written before about how important it is for distributors to invest in tech and data science. Distributors that sell through their own e-commerce channels own the customer data. They know what customers bought the last time they made an order. No distributor is going to win a price war with Amazon. But distributors armed with data can compete in other areas.

Delivery is one example, provided it’s done right. Amazon can deliver quickly, but not across all SKUs. Distributors with data on their customers’ past purchases can anticipate their customers’ future needs, bundling items together for faster shipping. B2B buyers aren’t as price sensitive as consumers, so fast shipping can make a huge difference.

Exclusivity. Distributors who decide to work with Amazon Business should never sell exclusively through the platform. Instead, they should choose products that are more safely marketed through a marketplace.

Of course, “safely” means different things for different business. In some cases, this may mean selling commoditized products. In other cases, it may mean selling highly-customized products, because that’s where the distributor can compete. The choice depends on the individual distributor’s strategy.

One thing distributors must avoid is becoming the low-price providers, which puts them in a category where other distributors with better unit economics can ruin them on price. Selling a commoditized product also runs the risk of commoditizing a brand name. And there is always a chance that Amazon could create a private-label version that is cheaper, further undermining the distributor’s brand. But again, some distributors may not care about commoditization on some products and may choose to deliver spot-spending orders to Amazon while maintaining control over their larger orders.

Preparedness. No matter which direction distributors choose to go, it’s critical to develop a strategy for dealing with Amazon business as quickly as possible. Those that want to sell through the Amazon marketplace early on can help define their category and mitigate the potential that they’ll become commoditized.

Meanwhile, those that wish to maintain independence can invest in an e-commerce presence that offers the ease and reliability of Amazon, while playing to the distributor’s strengths such as domain expertise and customer knowledge. By focusing on customers and data, distributors can further cement their relationships and grow into the future.

Suchit Bachalli is CEO of Unilog (www.unilogcorp.com), a provider of e-commerce solutions for B2B companies.

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