How to Keep Amazon Business From Stealing Your Customers

On track to do more than $10 billion in annualized sales this year, Amazon Business is pushing companies across all industries to rethink the way they work with the evolving B2B buyer.

In case you missed it, Amazon Business dropped a bombshell last month when it announced that sales for 2018 would surpass $10 billion—up from $1 billion in 2015.

“That’s faster than the growth of its consumer retail or cloud business units,” CNBC reports, noting that some industry analysts think the B2B e-tailer could become bigger than the consumer marketplace.

From Zero to 10 in Three Years

Launched in 2015, Amazon Business replaced Amazon Supply, which had been in existence since 2012. A year later, Amazon disclosed that the business marketplace passed $1 billion in sales, CNBC points out.

Justin King, president at B2X Partners and author of Digital Branch Secrets, a playbook for distributors that want to compete effectively in e-commerce, says he was shocked to see how quickly Amazon Business had spun up into a $10 billion powerhouse.

“In 2016, it was the fastest to go from zero to $1 billion dollars ever on the B2B side, and maybe even for any e-commerce site overall,” King notes. At the time, analysts predicted a jump to $6 billion or $7 billion in annual sales for the site by 2018. “Even those would have been crazy numbers,” says King. “Now that number is on track to hit $10 billion+.”

Introducing: The Fourth Pillar

Looking at Amazon’s overall business model, King says the company has traditionally divided its operations into three different pillars:  the marketplace (where B2C buyers shop and where third-party sellers hawk their wares); Amazon web services (a hosting platform for retailers and other customers); and Amazon Prime. Amazon Business is its newest addition and fourth pillar.

“If you look at the company’s annual reports, Amazon Business is mentioned in every third one; in fact, there hasn’t been an announcement related to Amazon Business in about a year,” King explains. “For them to do $10 billion now and opt to concentrate on this as a fourth pillar means that Amazon sees a significant opportunity.”

Analysts also see the potential. Robert W. Baird & Co. Inc., for example, envisions Amazon Business’ sales volume exceeding $25 billion by 2021. With nearly 50% of Fortune 100 companies buying from the site, King says electrical distributors should be looking closely at what that means to them, and what they need to do to compete effectively in a world where customer preferences, demands, and needs are changing almost daily.

Solving Customer Pain Points

King says it’s important to note that Amazon Business is not trying to build an “Amazon.com-like experience” with its B2B sales platform. Instead, it’s asking B2B customers what they need, what their pain points are, and what the company can do to help solve those challenges. Large, institutional customers (i.e., government entities, hospitals, schools, etc.), for example, have traditionally been relegated to buying through procurement systems.

“One of the first things Amazon Business did was create built-in, out-of-the-box integrations with all of those procurement systems,” says King, “to the degree that it now has more than 50 of those integrations in place.” In other words, the university or automotive plant that’s using a procurement system developed by Oracle can use that platform to buy electrical supplies directly from Amazon Business (and without needing to switch systems or duplicate its efforts).

“When you think about it, that’s pretty scary,” says King. The good news for distributors is that Amazon Business came up with that idea by talking to its large customers and figuring out how they want to buy. The not-so-good news is that the company is probably going to start using the same approach with smaller B2B customers, including the electrical contractors that your company has been working with for years (or even decades).

Take online search, for example. A perpetually difficult aspect of shopping on the web, search can be particularly difficult for the buyer who needs to replace an electrical component, but who doesn’t know how to go about finding it on the typical distributor’s site. But what if the same customer could take a picture of the component and sit back while Amazon matches that pic to the right item?

It’s already happening. In July, Amazon rolled out a new feature on mobile that lets customers point their camera at the item in question. Amazon then scans it, matches it, then directs the buyer to matching items from its product catalog. Currently capable of identifying over 100 types of fasteners, Part Finder was built using technology developed by Partpic, a company Amazon acquired in 2016, according to TechCrunch.

“Amazon didn’t just do this for the sake of doing it,” King points out. “It talked to its customers about what they wanted and needed, and then came up with a way to remove the ‘friction’ that exists between the customer and the ownership of the product. For industrial B2B customers, finding the right product is a big part of that.”

Get Off of the Sidelines

Most electrical distributors probably aren’t in the position to shell out millions of dollars to acquire a software company like Partpic, but that doesn’t mean they have to sit on the sidelines while Amazon Business courts its customers. King says one of the best things companies can be doing right now is getting out there and talking to customers about what they want, what they need, and what they’re missing.

Then, find ways to do the things that Amazon Business can’t. A few of those gaps include the industry expertise, product knowledge, and application familiarity that the e-tailer lacks.

“Amazon is an aggregator; it doesn’t have experts who can apply the expertise and knowledge to specific applications and problems like the independent distributor can,” says King, who tells distributors to dedicate a department (staffed by a handful of employees) to uncovering customer problems and coming up with ways to fulfill their changing needs.

“Think of your e-commerce site as its own digital branch,” says King, “and put an effort into creating an online presence that’s separate and unencumbered by legacy systems and cultural issues that tend to thwart innovation.”