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Evolve or Dissolve, Part II

Evolve or Dissolve, Part II

The impact that Amazon has had on both the consumer market and business-to-business channel has been shockingly clear:

  • In 2017, Amazon accounted for nearly half of all online purchases made in the U.S.
  • Amazon Business became a billion-dollar enterprise within its first year in existence; as of June 2017, it had over one million customers (and is continuing to add customers at an estimated rate of 10,000/week) as well as 85,000 sellers on its platform, up from 30,000 the previous year
  • Amazon Business currently offers over 21 million products in the ‘Industrial & Scientific’ category (where electrical, plumbing, HVAC, and other related products are found)
  • If Amazon penetrates the professional market in the same way as it has the consumer market, Amazon Business could achieve $600 billion in revenue by 2021

How can distributors compete with an online giant that continues to innovate, invest, and gain momentum at break-neck speed?  Following, industry experts continue to offer great ways for B2B players like distributors to evolve with Amazon, other game-changing B2B and B2C players, and their own customers in today’s competitive and fast-paced digital world.

  • Provide Value – According to Gerry O’Brion, Founder of What Big Brands Know (whatbigbrandsknow.com), distributors don’t have to be the absolute cheapest, they just have to offer the best value in order to succeed in today’s competitive market. “Amazon has been excellent at building a relationship with their customers, one of ‘we’ll make it easy and fast to get exactly what you want at the best price,'” he said. “You can go to The Home Depot and check prices and features right there, but Amazon has the better selection, and if you can wait a couple of days, you don’t have to load it into your car — it’ll show up on your doorstep.” To successfully compete, O’Brion concluded, “distributors have to create a different, more valuable relationship.” He highlighted Best Buy as an example of great B2C strategy. “A few years ago, Best Buy was struggling and their stock price tanked, but in the last five years their stock has risen nearly 500%.  The fact is, their pricing is similar to Amazon’s for big go-to items, but they have experts in-store to help customers navigate the increasingly complicated world of products associated with a connected life. From cell phones and security to internet light bulbs and voice activation, it’s all right there with experts to help you navigate,” he explained. “The message is that distributors must provide more value through their people. Technology is getting more and more complicated and distributors must help their customers maneuver through that complex playing field. If you’re in the same price range but provide more value, you can win,” he said.
  • Embrace the Evolution – According to e-commerce expert Justin King, senior partner at Washington, D.C.-based B2X Partners (www.B2XPartners.com) and co-founder of DigitalBranch (www.digitalbranch.co), “e-commerce is no longer optional, and as long as Amazon continues to make inroads into B2B, innovative businesses like SupplyHouse start as online-first businesses, the Grainger site ‘Gamut’ focuses solely on driving online product sales, and more mid-market businesses get in the game, the online distribution space will continue to get more and more competitive,” he said.  “There are technological solutions to these challenges, but they need to be approached strategically, iteratively, and with a commitment to the time, resources, and effort required to make e-commerce viable and competitive.”
  • Pursue Savvy E-Commerce Construction — While King said that the ERP serves brick-and-mortar outlets well, a robust e-commerce site requires a few core dependencies on and extensions from the existing ERP.  These include an application programming interface (API) that links your ERP to your e-commerce software to provide customer-specific pricing and branch availability, an e-commerce-ready ERP with the product information, customer pricing rules, and any other restrictions/qualifications for purchase that need to be carried through on the e-commerce site, and a product information management (PIM) and product data supply for images, product specs, downloadable data sheets, and other supporting material that will help make online shopping a clear, easy, and enticing process for visitors.  Along with strong product data and a fast and effective search mechanism, the next step is to define the customer experience.  “This can be done through online and offline journey mapping (an exercise to walk through the points of interaction customers have with your business) and will get you on the road to building an exceptionally relevant user experience,” King said.King noted that competitive success also requires possession of a sound e-procurement and punchout mechanism.  “Amazon is making inroads into B2B with an expanding product offering and the 2017 release of Amazon Business Prime to B2B customers, guaranteeing 2-day shipping at low corporate membership fees.  In the background, Amazon is also developing integrations for e-procurement/punchout with the leading ERP systems,” he said.  “This is a huge opportunity for Amazon to capture sales of products that aren’t currently serviced with the existing e-procurement solutions and represents a vulnerability and opportunity for distributors who haven’t yet built an e-procurement tool.”
  • Ensure Company-Wide Buy-In – Dirk Beveridge, founder of UnleashWD (www.unleashWD.com), a two-day, Chicago-based innovation summit for future-thinking distributors, advises distributors to shore up their competitive position in the new B2C/B2B world by ensuring that change agents within their firm help support the transformation and apply ‘internal pressure’ on those who don’t.  “To unleash your potential, you must find, welcome, and respectfully encourage the ‘troublemakers’ in your organization who shake things up in the name of improvement,” he explained.  According to Beveridge, distributor leaders need to harness the roughly 20% of the people on their team who want to change the rules and challenge normal operating procedures; they’ll not only help coalesce the ‘loyal 50%’ of team members who want to become part of the change efforts and are waiting to be led, but will also influence the 30% of employees who stand as ‘real opposition’ and will fight tooth and nail to protect the status quo and continue to do things as they’ve been done.
  • Know Your Customer – Denise Keating, President of Sycamore, IL-based data management services firm DATAgility, Inc. (datagility.com), believes that tremendous growth opportunities remain for those companies who are willing to make the investment in a digital strategy.  “Professionals are changing their buying habits from more traditional methods to more online platforms (and not just for high-moving, low-cost items) and as more millennials join the workforce, we’ll increasingly see buying habits shift from offline to online,” she said.  “To be successful, you have to be where your customers want to be with you and engage with them in the way in which they prefer to engage with you.”Finally, Keating said, “a digital strategy isn’t about the application of available technologies or new marketing methods — it’s about transforming your business to deliver more value to your customers and create a competitive advantage.  It requires blending business strategy and objectives with customer desires and leveraging the right technologies and content with new approaches and techniques.”
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Susan Bloomis a 25-year veteran of the lighting and electrical products industry.Reach her at susan.bloom.chester@gmail.com.

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