Amazon recently announced a new branch called AmazonSupply that aims to take on the role that industrial distributors have been doing for decades — supplying much-needed parts or MRO products to manufacturers in a timely, regular fashion. For manufacturers, it’s an intriguing new possibility, with the site being built with many of the same consumer-facing features, such as detailed product information and ease of use, and online ordering. At the same time, many manufacturers have long-standing relationships with their distributors, and don’t want to damage that collaboration.
But distributors and manufacturers both will need to think ahead and prepare for how these changes might affect their operations, and how it might change the way that businesses buy and sell from each other. To get more insight on this issue, we got a hold of Linda Taddonio, co-founder and eCommerce strategy officer at Insite.
What is Amazon, via AmazonSupply, aiming to do, exactly?
Linda Taddonio: AmazonSupply’s stated goal is “to provide earth’s largest, easiest-to-research, discover, and access selection of professional products required to support the maintenance, repair, operations, and project needs of business and professional customers.” The site offers competitive prices, fast shipping and a large selection of more than 1,250,000 products, including everything from office equipment to lab and scientific items for businesses.
It has major advantages of being an established brand with low overhead and a growing national network of warehouses to offer fast and low-cost shipping.
This seems like more of a threat against distributors, but could it affect manufacturers as well?
Taddonio: Clearly AmazonSupply is more of an immediate direct threat to wholesalers and distributors than manufacturers. However, AmazonSupply is also creating disruption in the larger business-to-business buying ecosystem. The sheer breadth of product under the Amazon umbrella requires that manufacturers pay attention from a competitive perspective and to make sure that the content representing their products is at a desired level.
What have you all heard about something like AmazonSupply? Are companies interested in buying from Amazon? Are others worried about losing business?
Taddonio: Yes, certainly there are a lot of companies that are worried about losing business to AmazonSupply, and rightfully so. In a recent study by Acquity Group on millennials, statistics showed that 90 percent of buyers age 18-35 purchase online, 63 percent have ordered from AmazonSupply at least once and 40 percent purchase frequently from AmazonSupply. These statistics are significant and are present in other age demographics as well, with lower statistics as the age increases. So, this is both a wake-up call and a rallying cry for businesses to establish their own eCommerce presence. While the concern about losing business is legitimate, traditional distribution business models still hold an important advantage over AmazonSupply in that they have established customer relationships and provide many other value added services such as extensive product knowledge and expertise.
Everyone in the eCommerce space says buyers want an Amazon-like experience when buying from another industrial company. What are some of the key elements of what makes that experience? Ease of buying? Images? Reviews?
Taddonio: B2B buyers not only want a B2C-like customer-centric experience that is intuitively designed and loaded with rich content and interactive functionality, but they also want their B2B business process, policies, and programs from the distributor reflected in the site. From a B2C features standpoint, that would certainly include merchandising tools like product comparisons, customer reviews, buying lists for future shopping trips, custom pricing and robust search capabilities.
In addition, we now increasingly see customers looking for product kitting and configuration tools that allow them to change the functionalities of a core product, or fully customize a product for purchase. From a B2B standpoint, customers are looking for tools that allow them to streamline and automate their purchase order processing. Punchout, for example allow a buyer to access your web site from their e-procurement system, which can eliminate double-entry of orders. Order workflow, request for quote, customer administration and budget/contract management are other key features now coming into prominence.
What can a company do to combat Amazon? Is there anything that can be done?
Taddonio: The first thing companies can do to compete against Amazon is to not try to be Amazon. If you read the recently published “The Everything Store: Jeff Bezos and the Age of Amazon you will learn that even Amazon only focuses on the customer, not the competitor, in an effort to provide what customers need and want, when and how they want it.
The key to succeeding is to craft a strategic eCommerce plan, acquire the necessary technology, provide adequate resources and budget, offer a broad and deep product selection, provide personalized customer service and aim to become the ultimate go-to resource for any product questions or concerns in your industry all under the umbrella of a B2B-centric marketing plan.
Ensuring that your eCommerce solution is deeply integrated to inventory, pricing and customer data including order history will allow you to offer a completely personalized online shopping experience that will surpass anything Amazon can provide.
Should a manufacturer even expect to be able to sell its products directly all the time? Most consumer-focused companies, for example, sell through retailers.
Taddonio: Manufacturers have a responsibility to promote their brand as much as possible and to craft and support an omnichannel experience just as any other industry. Many times a brand manufacturer can strengthen its brand directly through B2C in geographical areas not covered by their distribution channel. Likewise, having a B2C site for replacement parts is often advantageous to the customer and the distributor from an ease of use and efficient inventory management perspective. Increasingly, manufacturers are being asked to drop ship product direct to end users on behalf of a distributor. All of these activities and more can be brand building and the pros and cons of all channel strategies should be weighed and considered.
How do you see this situation changing over the next few years? Will manufacturers give in to the big players like Amazon, or will they carve out their own niches?
Taddonio: I believe we will continue to see the impact of digital disruption in new and creative ways for the next several years. The impact of social, for example, is just starting to show up in various B2B offerings. Over the next few years, we’ll see manufacturers’ and distributors perceptions continue to change as they realize that the customer is in charge and will dictate who thrives. This perception is already taking hold.
They will also realize that the entry of Google and Amazon into the B2B space is a new opportunity for them to transform their business, and work to solidify their customer relationships with the potential to be more profitable. Although AmazonSupply has some clear advantages in the world of eCommerce, wholesalers, distributors and manufacturers alike still have an edge over the newcomer: established B2B customer relationships, product knowledge and expertise, and a considerably wider product assortment within their vertical. By leveraging each of these advantages, both manufacturers and distributors will be able to combat the impact of the AmazonSupply strategy.
Linda co-founded Insite in 2004, bringing 25 years of experience in industries focusing on manufacturing and distribution. She brings a unique understanding of eCommerce initiatives, business process, and ERP knowledge, as well as an extensive financial background to Insite Software. She offers Insite’s clients a unique blend of expertise, helping them to set and evolve their eCommerce strategy to deliver B2B or B2C commerce sites.
Linda spent 10 years as a successful independent consultant focusing on ERP software selection, implementation, training, and business process improvement with a number of different manufacturers and distributors. She is a CPA, has a B.A. in Music and a M.A. in Accounting from the University of Iowa.