Every weekday in December, tED magazine is counting down the Top 20 Stories of 2016. Below, the #18 most-viewed story of the year, originally published on January 26, 2016.
By Bridget McCrea
In December, Amazon threw down yet another gauntlet by announcing that it’s customers now have access to a “punch-out” link in procurement software from Coupa Software, bringing to more than two dozen the number of procurement software applications linked to Amazon Business, as reported by B2B Ecommerce World.
As if being the 300-pound e-tailing gorilla wasn’t enough, now the company’s Amazon Business unit is using this “punch out” software to further intertwine itself with industrial buyers. According to the company, the Amazon PunchOut program supports online purchasing systems, which are common in business-to-business (B2B) environments.
Amazon defines “punch-out” as “industry terminology for purchasing supplies through the Internet using an intermediary purchasing system. Business customers can select Amazon.com through their purchasing system and purchase on Amazon.com on behalf of their business.
Getting its Ducks in a Row
This latest move by Amazon shouldn’t come as too much of a surprise for NAED members. tED magazine has been tracking the company’s maneuvers within the industrial marketplace for a couple of years now. In April 2015, AmazonSupply Expands with Amazon Business discussed the company’s repositioning of its business-to-business (B2B) platform and a few months later Delivery By Drone in 30 Minutes? Amazon Says it’s Coming outlined the e-tailer’s ambitious plans to use commercial drones to deliver packages in 30 minutes or less.
Also on the delivery front, Amazon announced in December that it would start using its own trucks to deliver goods, potentially setting itself up to compete with the likes of FedEx, DHL, and UPS. From Amazon Strengthens its Delivery Capability, we learned that the company’s new fleet of trucks would be used to deliver packages and market Amazon across the country.
Now Amazon Business has moved into the bid software business – a place where many electrical contractors already go to get pricing and availability when drawing up their own project bids. Some are using traditional, installed software programs to do this and others have turned to cloud-based systems that allow distributors to link into the system and provide their inventory, pricing, and delivery information for consideration.
“For users of procurement software that strive to click out to feature-rich, e-commerce sites, Amazon Business is continuing to play a bigger role as an e-commerce destination,” writes B2B E-Commerce World’s Paul Demery. “Because Amazon Business is a marketplace of thousands of sellers, it provides buyers punching out from procurement software the opportunity to purchase on a single site products from as many product catalogs as their company approves.”
The fact that Amazon Business is blending its own powerhouse e-commerce machine with online bidding software from companies like Ariba, eRequester, Vinimaya, Oracle Fusion and iProcure, SAP SRM, and PeopleSoft (to name just a few), could present problems for the electrical distributor that isn’t up to speed with e-commerce and online transactions. By upping their e-commerce game yet another notch in an arena where many distributors continue to use mediocre websites and e-commerce capabilities, Amazon Business could lure more contractors into its web and make it harder for independent firms to compete.
“Business customers want better access to selection with great pricing and trusted delivery,” said Prentis Wilson, vice president of Amazon Business, in a Coupa press release. “Coupa is helping customers achieve their purchasing goals by providing them with direct access to the Amazon Business marketplace.”
Luring in B2B Customers
As Amazon Business continues to shore up its market approach and find new ways to entice more B2B customers, independent distributors can be taking a similar approach by listening to what their customers want and developing innovative ways to meet and exceed those needs. “Amazon continues to push the envelope of what it’s able to do with e-commerce,” says Ranga Bodla, industry lead for wholesale distribution at NetSuite in San Mateo, Calif. “Not all of those ideas are going to pay off for Amazon, but that doesn’t stop it from trying.”
Rather than attempting to go head-to-head with an e-tailing giant with seemingly bottomless pockets and an endless stream of new ideas, electrical distributors can shore up their own positions in the marketplace by paying close attention to their customers’ changing expectations and demands. Then, use that information to develop systems, strategies, and solutions that meet those demands. If, for example, your electrical contractor-customer spends a lot of time on the job site with an iPad in hand – searching for, pricing, and ordering materials – then develop an online platform that puts your company (and not Amazon Business) at the forefront of that exercise.
And remember that while customers are perpetually focused on lowest price and fastest delivery times, they also value good supplier relationships, support and expertise, and value-added offerings that help them work more efficiently.
“The fact that Amazon Business is using punch-out software could potentially drive down prices, but it may not directly impact the buying behavior of electrical contractors,” says Bodla. “I don’t think customers that were buying from XYZ Distributor will suddenly start buying from Amazon, but having this additional tool (i.e., the punch-out software option) could find them demanding a bit more from their existing suppliers.”
If, for example, Amazon Business offers the option to buy via credit note or credit memo (i.e., when a seller issues a memo for the same or lower amount than the invoice, and then repays the money to the buyer – or sets it off against a balance due from other transactions), or offers a lower price on an item, then contractors may ask the same of their distributors.
Finally, Bodla says any distributors that aren’t already transacting business online – or investing in such initiatives – should get a “huge wake-up call” from Amazon Business’ latest move. “It’s time to look at the online foundation you’ve built – or the one that you’re building now,” says Bodla, “and figure out how to add to it and enhance it in a way that really addresses the customer experience. That’s going to make the difference when you find yourself up against a much larger competitor online.”
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 firstname.lastname@example.org or visit her website at www.expertghostwriter.net.
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