Electrical distributors can remove themselves from the perpetual “race to the bottom” on price by leveraging technology, data, and the smart selling strategies that they’re already using.
Competing with Amazon Business is all about speed, information, service, and support—and in no particular order. Because the e-tailer is using a non-traditional approach to business-to-business (B2B) selling, it’s pushed a lot of bricks-and-mortar distributors to rethink their business models and how they work with customers.
The threat is real: On track to bring in more than $10 billion in sales in 2018 (up from $1 billion in 2015) Amazon Business is growing faster than its parent company’s consumer retail or cloud business units, according to CNBC. And if that uptick in sales volume doesn’t make electrical distributors sit up and take notice, this definitely will: In October, the company rolled out new Business Prime benefits for its B2B customers in the U.S., Germany, and Japan.
“Amazon is about enabling people to buy easily versus ‘going out and selling to those customers,’” says Charlie Lawhorn, chief customer officer at data science/master data management solutions provider Riversand. Here’s the kicker: Amazon does this with “general” product information that it gets from manufacturers, and without much actual industry or product knowledge.
“Amazon can’t define a solution, nor can it easily provide detailed options for B2B companies to consider,” Lawhorn points out. “It expects the customer to know what he or she needs, and then offers a simple platform for buying it.”
Knocking On Your Door
As Amazon continues its growth in the B2B sector, distributors find themselves facing off against a new type of competition—one where speed and information are the “crucial new factors,” Lawhorn points out, and where in addition to the quality service and support levels that they’re well known for providing, independent distributors also have to be able to move “strategically fast,” or risk sacrificing competitive advantage.
“Speed is about making decisions based on traditional market information, as well as understanding emerging digital trends and commerce models,” Lawhorn points out. “It’s also about supply chain, fulfillment, and adopting new customer experience tools and technologies.”
Where independent distributors still have an advantage over Amazon Business is in the area of product information and application expertise—neither of which the e-tailer has at this point. Amazon is also not really known for having quality content or in-depth product information, says Lawhorn, nor does it have product experts on staff to help define detailed specifications based on fitment or solutions.
“Amazon is known for its [low] prices and its product assortment,” Lawhorn says. “While it offers some limited comparison charts, it has no comprehensive tools that help B2B customers compare similar items. And, Amazon can’t do this easily either because the data needed to drive those capabilities does not exist in its platform, nor is it normalized in a way to quickly enable it.”
Riversand’s CMO Katie Fabiszak concurs and says that, to date, Amazon has created its dominance by focusing on convenience and speed, but that it can “lack the detailed information required for a more value-based sale, particularly for more sophisticated, component level products.” That’s good news for electrical distributors that specialize in the kind of products and services that just naturally require an additional layer of expertise, advice, and support.
“For more complex goods like electrical components or industrial machinery, where the potential for variance is greater, being able to examine the product or interact with someone with detailed knowledge is crucial to verifying the quality of its intricacies which ultimately determine customer satisfaction,” Fabiszak points out, noting that right now Amazon can really only offer a truly “self-serve” model. And, it operates under the assumption that buyers know exactly what they’re looking for and do their own homework.
But this is not the way the traditional B2B supply chain works. “Customers have come to rely on the expertise and in-depth knowledge of salespeople,” Fabiszak says. Electrical distributors can leverage this to their advantage, she says, acknowledging that what a specialty parts distributor may lack in breadth of related inventory, it can still make up for in expertise and product depth.
“Employees of specialty distributors have often been in their industry longer than other industries, so their knowledge can not only be institutionalized with online tutorials, FAQ’s, videos, and other forms of site content and content marketing,” Fabiszak notes, “but these valuable employees can be directly engaged in online customer service systems–such as live chat.”
Ramping Up a Data Strategy
At least for now, Amazon Business will have trouble offering the level of customer knowledge, expertise, and support that electrical distributors are known for. But rather than waiting around for the e-tailer to get its collective service/expertise act together, Fabiszak tells electrical distributors to start getting their data strategies in order and figuring out how to transfer valuable product knowledge to end customers in the digital world. The best way to do this is by seamlessly aligning product content throughout the supply chain, she says, capturing that product knowledge, and then sharing it.
For example, distributors can use master data management (MDM) software, product information management (PIM) solutions, and good vendor data management strategies, to provide high quality, multifaceted product information from across the entire supply chain. Using a vendor portal, for example, both manufacturers and distributors can add rich product information with all of the imagery, measurements, and other descriptors needed to aid the sales and decision-making process downstream.
“This information then gets carried along the supply chain protected as a ‘record of product truth,’ and other members of the supply chain can add to and enrich the data using a PIM solution, but not alter (without the vendor’s validation) the core product specifications,” Fabiszak explains.
Then, as products get closer to the final B2B customer, distributors can use tools like video, 360-degree imagery, and links to live chats to further enhance the selling process. “New technologies like these should not be seen as necessary knee-jerk reactions to outside threats like Amazon,” Fabiszak concludes, “but rather great new tools to help organizations transform digitally to greet the digital age that is disrupting all industries.”
Tagged with Amazon, B2B, e-commerce