Is Your Distribution Business Differentiating Itself in the Age of Amazon?

Ranga Bodla, Head of Industry Marketing, NetSuite

November 21, 2018

Amazon Business has put a huge stake in the ground across many B2B distribution sectors. It’s time for B2B distributors to sharpen their pencils and differentiate themselves, or risk being left behind. 

Ever since Amazon launched its Prime service in 2005, members have been shelling out an annual fee (currently $119) in exchange for free two-day shipping within the continuous U.S., among other benefits. Since then, Amazon has accumulated more than 100 million paid Prime members.(opens in new tab)

Now, the online retailer’s business buyers will get the same benefits—and then some.

In October, Amazon Business launched new Business Prime(opens in new tab) benefits for companies in the U.S., Germany and Japan. Business Prime membership costs $179 per year for up to three users; $499 per year for up to 10 users; $1,299 per year for up to 100 users; and $10,099 per year for over 100 users.

Along with perks like spend data visualization tools and help identifying potential cost-savings opportunities, members now get same-day delivery or free one-day shipping on qualifying orders of $35 or more.

It’s Time to Act 

As Amazon rapidly accelerates its delivery of functionality and benefits for business buyers, distributors across most industry sectors are being forced to think about what this means for them.

Right now, within the industrial segment alone, Amazon Business is selling fasteners, hydraulics, pneumatics, plumbing, industrial electrical, material handling products, metalworking and power transmission products (among others).

Adding Business Prime to the mix could make things a bit more challenging for companies trying to face off with the etail giant on the B2B front.

“From our vantage point, these latest additions to the Business Prime program demonstrate just how fast this $10 billion distributor can learn and grow,” Thomas Gale writes in Amazon Business Prime News: One Million Same-Day SKUs and New Benefits.(opens in new tab)

“The company is leveraging its unsurpassed cash management practices to enable much more flexible payment terms,” Gale continues. “Amazon Business is leveraging its enormous DC [Distribution Center] network to create a same-day assortment that surpasses any rival, thereby offsetting part of the advantage branch-based distributors have used as a differentiator.”

This may be so, but what Amazon Business lacks is the product and application expertise that the typical independent distributor has spent years (or even decades) building out.

With most of its business managed through its website, for example, neither Amazon Business nor its customer service reps are equipped to answer questions like: “Which specialized abrasive wheel is best for this particular application that I’m working on?” or “What type of wire can be run inside this conduit that I’m ordering?” This is where distributors have a chance to differentiate themselves in a way Amazon cannot.

If nothing else, Amazon’s latest move only reinforces the fact that distributors need to get their collective ecommerce acts together. Those firms still using first-generation websites—or, those that use their sites as nothing more than a calling card—for example, will quickly be left behind if they don’t establish (or improve) their online presence. By combining commerce and enterprise resource planning (ERP) on a single platform, for example, distributors can streamline their front- and back-end sales operations while creating an effective, cohesive online presence.

Stepping up Value-Added Offerings

Distributors can also start sharpening their “valued-added” pencils by promoting the service, support and add-ons that make their customers’ lives easier. Customers typically need these services on a daily basis—services like vendor managed inventory (VMI), kitting and assembly, warehousing and storage (for contractors that have limited space on the jobsite, for example), and even light manufacturing.

Long-term relationships, a local presence and a well-stocked warehouse that customers know is close by can also help distributors avoid getting into a price war with Amazon Business, or any other online seller, for that matter.

By leveraging what they know best, and by continuing to differentiate themselves on as many levels as possible, B2B distributors can maintain and even grow market share in today’s ecommerce-centric business world.

The Bottom Line

Every successful distributor knows that simply selling a commodity product at a lower price is a failing strategy, yet that’s exactly what many of them are choosing to do in the Amazon Business era.

It’s time to buck the trend by giving your customers something that they can’t get on Amazon. Solve their most pressing pain points, help them do their jobs better, provide a superior level of product expertise, offer outstanding customer service, and always go the extra mile—even if it means making 5 a.m. deliveries to the jobsite on next-day orders.

Learn more about Amazon’s Impact(opens in new tab).

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