Amazon; Friend, Foe or Frenemy to Industrial eCommerce?
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Confront Reality - What's Your Amazon Business Strategy?
In just 3 years Amazon Business's results are impressive - 50% of all product searches start on Amazon (not Google!), 3rd parties sell more than 50% of products sold on Amazon, their first year's revenue exceeded $1B from more than 1M business customers. They are disrupting industry after industry and that includes industrial manufacturing and supply.
For many industrial suppliers Amazon Business has become the 'elephant in the industrial eCommerce room' and they need to decide if Amazon is friend, foe or frenemy? What's a frenemy? Someone you partner with in one area but compete with in another area. But remember the implication of Michael Corleone's advice in 'The Godfather', "Keep your friends close and your enemies closer" - know your enemies and treat them as well as you treat your friends so they won't know that they are, in fact, enemies!
How well do you know Amazon Business?
We all need to know our friends/partners and enemies/competitors well so let's start with an update on Amazon Business. Skip this section if you are already up-to-date and know all about the options in the diagram below:
Amazon's mission is, "to be the earth's most customer-centric company, where people can find and discover anything they want to buy." Their implementation of that is a customer focused obsession to offer the broadest selection at sharp pricing with the greatest convenience technology can create. If you haven't already, you should read Jeff Bezos's 2018 letter to shareholders. In it he profoundly recognizes human nature. "One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’." So he continuously innovates and when the innovations don't work, learns from them and tries again. For example, Amazon Business has 3 key differences from its predecessor, Amazon Supply:
- Amazon Supply stocked and directly sold all its products. That limited the product selection. Amazon Business can stock and sell any products.
- Amazon Supply was a separate URL, Amazon Business is now the 'B2B Marketplace' part of Amazon.com and leverages its public trust and reputation.
- Amazon Business addresses the different needs of B2B buyers, such as spend/user controls, multi-user accounts, PO numbers, tax exemption, preferred suppliers (ISO 9000, minority/women owned,etc.), eprocurement system integration and adaptable reporting for sellers and buyers.
As the diagram above shows there are multiple ways that suppliers can work with Amazon:
- On the right hand side Amazon can act as a reseller of your products setting pricing, investing in stock and providing customer service (including Prime).
- On the left hand side you are the seller, set the price, ship the product and provide customer service.
- In the middle are variations on you as the seller in which you can delegate shipping and customer service to Amazon (including Prime)
- Another, relatively new, option is 'seller fulfilled Prime' through which mature and experienced companies (with significant investments in systems and distribution) can gain Prime eligibility.
If you want to know more contact Amazon Business.
As always in our blog posts we share our conclusions and recommendations for industrial suppliers:
- Amazon's B2B rise signals a huge market shift to B2B eCommerce. What does this mean for Industrial eCommerce? Industrial suppliers currently fall into 2 broad categories:
- eCommerce Leaders and Followers - a smaller group who have successfully adopted and established eCommerce, for example Grainger and MSC with >50% of revenue from eCommerce, and those who have strategically established eCommerce and are achieving fast growth in it.
- eCommerce Laggards and Deniers - those who are far behind on eCommerce, have no or poor websites, and some that simply hope that eCommerce will just go away. Just as we don't return to a bad restaurant, we likely don't return to a bad website!
We recommend industrial suppliers join the first category and do eCommerce themselves with their own website or do it through Amazon Business or preferably do both! If you haven't started yet partnering with Amazon is an easy way to get started by leveraging Amazon’s large B2B eCommerce investment. According to Brian Beck, SVP of eCommerce and Omnichannel Strategy at Guidance, their clients often see a 30%-50% revenue uplift from adopting this new channel. He bluntly says, "take advantage of this fast growing channel, or get left behind by those that do. Position yourself ahead of your competitors – there is an opportunity right now (and it will not last) to capitalize on Amazon’s efforts to build out their assortment through marketplace partnerships."
- SEO now needs to include Amazon
- we've often recommended an SEO focus with search engines to ensure your products get found when people search online. But now Amazon is a 'search engine' too, because half of all product searches start on Amazon! You need to include Amazon in your SEO! You can do that in several ways, form a direct relationship with Amazon Business, enable one or more of your distributors or resellers to form a relationship with Amazon Business, appoint one or more partners to represent your products on Amazon Business. The key point is not to just have your products on Amazon Business but to also take control of your brand on Amazon. For example the descriptions, pictures and CAD models of your products on Amazon Business should be your responsibility.
- Amazon Business Will Continue To Get Better - given their high standards, continuous innovation, learning from mistakes and phenomenal resources, Amazon is neither going away (like many big box stores did) nor will they slow down. Unless you have the resources to get and stay ahead then we recommend partnering with them.
At CDS we continue to develop our technologies and help industrial suppliers succeed with online marketing and industrial eCommerce. As always, please share your comments below or, if you'd like our opinion on your B2B eCommerce plans please call us or click either button below: