Competing with Amazon: Distributors and Manufacturers
As the world shifts to e-Commerce and B-to-B buyers shift how they purchase goods, survival very well means out-positioning the gorilla known as Amazon. Amazon’s scale presents problems for middle-market and small scale companies. So how do distributors and manufacturers compete with Amazon?
The simple answer is to become exceptional at areas of service Amazon doesn’t do so well; take advantage of resources to deliver great e-Commerce solutions, optimize your supply chain, and deliver value-add to your product offering.
So what does Amazon not do well? Adding value to their products - A distributor can service products or create commerce for spare parts, service, and or replacement. Another area where distributors can take advantage of Amazon is in value-add through kitting and assembly - Amazon doesn’t provide this and this can differentiate business for savvy online B-to-B consumers. These types of customers will gravitate toward a customized product or solution that requires complex assembly.
Sales & Support can also be a big differentiator: Servicing products or commerce can be accomplished by a set up a spare parts service website or implementing call center support.
Amazon is known for setting the bar for the user experience and streamlined purchasing. But this doesn’t mean you can’t have an excellent e-commerce solution and offering as well. The price to deliver a healthy e-Commerce platform has decreased significantly over the last few years. Additionally, the cost of product data is lower which can help a distributor or manufacturer target the right B-to-B consumers at a low cost. With these buyers in mind, it’s important to think about user experience; B-to-B buyers are shoppers, but aren’t like consumers. The person who does procurement doesn’t have the ability to decide on different products so in many cases they aren’t just buying on price. Remember, you can’t out-Amazon Amazon, so focusing on these buyer's purchasing experience and product needs is important.
With the scale of Amazon’s distribution network, it is critical for distributors and manufacturers to optimize their supply chains and develop a well thought geographic strategy. First and foremost, this involves labor. Real estate prices can look very promising in some markets, but can be quickly offset by shortages in labor, poor labor quality, or high wages. A distributor or manufacturer must analyze labor before a realignment of an existing distribution center network or a capital investment in a new plant is made. But labor isn't the only component that will drive real estate and geographic strategy in the face of Amazon. A deep dive analysis into transportation spend, service levels, and municipal incentives will complete the operational framework needed to outposition Amazon.
Amazon Labor Growth by State
And after all of this, identifying the risk factors within a distribution or wholesale business in light of Amazon is also important. If companies selling a low value or ‘hands-off’ product your business may be significantly at risk of being gobbled up my the e-Commerce machine. Take a look at percentage of sales of these products and determine a breaking point in the event the product group falls victim to lower prices.