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6 Important B2B Distribution Trends to Watch    

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6 Important B2B Distribution Trends to Watch    

Applico’s Alex Moazed discusses the online selling opportunities and challenges that distributors are dealing with in 2019.

 

As CEO of Applico, an end-to-end advisory firm that helps enterprise companies understand threats posed by platform companies like Amazon and Google (and leverage the opportunities available to compete with disruptive forces and emerge as “winners”), Alex Moazed has his finger on the pulse of some of the biggest transformations in B2B distribution right now. Here are six developments that he says all electrical distributors should be paying attention to this year:

  • B2B distribution is on a tear right now, and there’s no end in sight. B2B distribution is two to three times the size of B2C retail and Amazon Business is estimated to be a top 20 distributor with over $10 billion in gross merchandise volume (GMV). Amazon Business is continuing to grow at 20% month-over-month, Moazed points out, and is on track to becoming the dominant generalized marketplace in B2B. However, there is still room for a number of vertical-specific marketplaces in the $6-8 trillion mega-industry known as B2B distribution, he says. “Since the threat is more nascent in B2B (Amazon Business started a few years ago) than in retail, incumbents still have time to build their own marketplaces from scratch like Walmart tried to do in 2009 with the Walmart Marketplace,” Moazed notes. “While Walmart’s initial marketplace failed, distributors today have the benefit of learning from [its] mistakes in their own platform innovation efforts.”
  • Amazon Business finally may be getting its collective “value-added” act together. When Amazon Business hit the $10 billion in GMV point, that milestone put the e-tailer into the top 20 B2B distributor list within a 3-year period of its initial rollout. This didn’t alarm electrical distributors that have made their mark by providing value-added and other services that the e-tailing giant couldn’t…but that could be changing. “Amazon won Stanford University as a customer, which was pretty shocking in a world where distributors know that large customers want value-added services,” Moazed explains, adding that a large university also has many different constituents, procurement rules, and specific needs. “Obviously, not all of that is going to just fit out-of-the-box on Amazon Business,” says Moazed. So, what did the large e-tailer do to win the account? It assigned a couple of dedicated service reps to that account. “If the professors or procurement department can’t find what they’re looking for, they can call someone to source it and/or track down the supplier,” Moazed says. “This shows that Amazon will succumb if it wants something badly enough. It knows that its tech and marketplace can’t do everything.”
  • Amazon Business’ proposition is getting harder for B2B customers to turn down. When a force like Amazon offers B2B companies a huge product catalog, pricing transparency, self-service and—when warranted—a dedicated service team, the proposition is hard to turn down. Citing a recent report from Amazon that customers whose procurement departments use its online marketplace cut down on labor costs by up to 50%, Moazed says the e-tailer’s “plug and play” platform is attracting larger, institutional customers. “Amazon has made a big push into government, health care, and universities,” says Moazed, “all of which have different, tiered procurement rules. But when you can plug right into a portal and have everything centralized, the proposition is pretty compelling.”
  • Distributors of all sizes can work with Amazon (at least on some level). According to Moazed, at least one multi-billion-dollar electrical distributor is using Amazon Business to sell under a different brand name. “It’s not doing over $100 million in revenue on there, but that distributor is probably selling tens of millions through the Amazon Marketplace,” says Moazed. “It’s obscure stuff, but it allows the distributor to make some incremental revenue and with pretty good margins.” He says smaller distributors that may not have the web presence and/or platform to reap big e-commerce rewards can borrow a page from that larger firm. “Sell stuff that you don’t sell in your core business, and that you can make good margins on,” says Moazed. “Use it to your advantage.”
  • Alibaba, Walmart and others also want to do business with independent distributors. “Selling on Amazon is a no-brainer,” says Moazed. “What electrical distributors that really want to be on the forefront should be trying to figure out is, ‘How do I sell on the other marketplaces?” Predicting that there will be at least one other winner in the B2B e-commerce game, Moazed points to Alibaba and Walmart as two other potential online partners for electrical distributors. “Alibaba is making a big push in B2B distribution in the U.S. right now,” he explains, “and they take lower transaction fees.” Walmart, which acquired Jet.com in 2016, is also widening out its footprint on the B2B front. “Marc Lore (Jet.com’s CEO) is really pushing Walmart in a lot of different directions,” says Moazed, who notes that there are also some up-and-coming startups that could pose a threat to some of the larger B2B e-tailers. “Those smaller companies are trying to solve different customer problems, and are starting out in different niches,” Moazed. “If an existing distributor supports them—or the larger e-tailers like Alibaba and Walmart against Amazon—it can not only make some extra revenue, but it can also put that distributor in a pretty advantageous position in the market.”
  • Distributors aren’t going away anytime soon. Just because more distributors are trying to figure out how to “get in tune” with larger e-tailers doesn’t mean that their core business is going away anytime soon. However, much like many B2C sellers have aligned with Amazon’s online selling platform, more B2B distributors may follow a similar path in the near future. One of the biggest changes that distributors will have to adapt to will be recognizing that they no longer ‘own’ the end customer—Amazon does. “Distributors will just have to get onboard with that,” says Moazed, who tells electrical distributors to make their moves now rather than later. “The more you can be at the forefront of understanding how to work with these e-tailers, the better. Going forward, they’re only going to own a larger and larger portion of the market.”

 

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Bridget McCrea  is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

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