Seventy percent of distributors view Amazon Business as a threat.1 And yet, distributors are still optimistic about their growth. In fact, 54% of wholesale professionals expect sales growth to be up 5 to 10%, while 23% believe growth will be up more than 10% in 2019. Only 5% think that sales will be flat or go down.2 This is very optimistic considering most wholesalers indicate they feel threatened or impacted by Amazon’s influence in the industry.
Maybe distributors are looking at their relationship with Amazon all wrong.
Amazon’s free two-day shipping, limitless catalog, distribution and warehouse network and convenient website have drastically changed customer expectations, in what the industry calls the Amazon Effect. But, it’s also created opportunities that small businesses never had before. Now a US distributor can get its products in the hands of a consumer in Vietnam, an accomplishment made easier by Amazon’s massive infrastructure. In fact, in 2018, 50,000 small- and medium-sized businesses exceeded half a million dollars in Amazon store sales – a substantial revenue stream for organizations this size.
Many wholesale startups leverage Amazon to get started in ecommerce. This allows businesses to focus on products and building a brand before worrying about managing an ecommerce site internally or establishing several warehouse locations.
Other more established businesses are using Amazon to think strategically about distribution channels. Instead of using Amazon to sell the same products, following the same strategy as its internal site, many distributors are identifying ways to diversify offerings across different channels.
For example, some distributors use Amazon as a sell-through opportunity. These distributors offer only certain products on Amazon and then point consumers to a full catalog and preferred pricing on the business’s main site. In this case, they are leveraging Amazon primarily as a marketing opportunity to drive more traffic to the company’s internally-managed ecommerce site.
Other businesses use Amazon to test new products. Under this approach, distributors can leverage Amazon’s infrastructure to see how products will be received before spending the resources to launch the product on its own site.
And some businesses use Amazon to sell refurbished products or older models. This is an effective way to generate revenue from older products without having to utilize internal warehouse space and manage a large ecommerce catalog of outdated products.
However, Amazon can’t do it all. First, it can’t offer personalized customer experience. Whereas, distributor’s ecommerce sites can offer things like customer portals with specific pricing and discounting based on established customer relationships. On top of a personalized site experience, distributors can provide more personalized support and consulting services that Amazon can’t compete with. Distributors know their products inside and out. While Amazon offers a breadth of items, it’s difficult for the company to provide the level of detail or personalized support for each product in the ways that smaller distributors can.
Nor can it provide complete visibility into how shoppers are interacting with products. Amazon provides limited reporting capabilities to businesses using the platform. On the other hand, distributors’ main sites allow full visibility into things like how shoppers are finding products or what they’re leaving in their shopping carts.
There’s a strategic tradeoff between using Amazon and a distributor’s main ecommerce site. The trick is identifying how to use each channel to benefit one another and increase overall effectiveness.
For more, check out this video.
Other Sources:
1. Modern Distribution Management, http://www.netsuite.com/portal/assets/pdf/infograph-8-facts-about-amazon-business.pdf.
2. Modern Distribution Management, “2019 Outlook for Distribution,” (January 10, 2019).
