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Who’s Afraid of Amazon? Not These Marketers.

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Who’s Afraid of Amazon? Not These Marketers.

In February, I wrapped up my second Marketing Planning Master Class for members of the electrical distribution channel. Class members ranged in age from 27 to 52 (mean = 38) and work across the U.S., from New York to Texas. Some came from other industries; others had been working in electrical distribution for 10 or 20 years.

As part of the strategic planning process, the group conducted a competitive analysis of Amazon—its strengths, weaknesses, brand, objectives, strategies, and tactics. The results are summarized in the chart (below). We also discussed several issues including the threat to their businesses, their ability to compete, and strategies for maintaining market share. Here’s what they had to say.

Do you see Amazon as an immediate threat to your business? If so, how is your company addressing that threat?

“I guess one could ask ‘Compete on whose playing field?’ We are definitely more capable of providing technical support, credit, job management assistance, etc.,” explained Marketing Manager Scott Lepsky of the F.D. Lawrence Company of Cincinnati, Ohio. “But as the market changes to include more millennials who want a web-based interface, the Amazon format becomes an issue.”

For now, most of these marketers aren’t worried. “I feel local competitors are more of a threat at this time,” shared Chris Wolff, assistant vice president of Medina, Ohio-based Wolff Bros. Supply, Inc. “We generally work on smaller margins than what Amazon is accustomed to. I don’t know if they’ll accept the financial risk at the lower margins they’ll have to sell at to be competitive.”

Carolyn Herring, marketing associate for Virginia-based Womack Electric Supply takes a more aggressive stance. “We can offer our customers credit options; Amazon doesn’t have that unless you open a credit card account. Our strategy is to continue looking for solutions that Amazon can’t offer.”

“I don’t see them as an immediate threat, but where will we be in three to seven years?” asks Director of Marketing Kim Johnston of Butler Supply, Inc. Butler has 26 locations throughout Missouri and Illinois. “We will continue to be involved with AD and NAED and use our resources to compete against Amazon with tactics like product data standardization.”

In 2017, Amazon began directly targeting electrical contractors with a $10 off coupon in trade publications. These marketers were unfazed by Amazon’s offer. Although, Johnston thinks Amazon may be laying the groundwork for the future. “I think the gift card was Amazon’s way of capturing customer data to begin a more strategic marketing effort.”

Jeff Feith, marketing manager for Good Energy, L.P. of New York is cautiously optimistic. “I don’t see a coupon from Amazon as a threat to our business. We target designers and contractors who find business in New York City skyscrapers. Interestingly enough, we are trying to differentiate ourselves from Amazon (and Home Depot). But I agree with Chris [Wolff]. Local competitors are more of a threat. But, how wrong we may be!”

What, if anything, should the electrical distribution industry be doing to combat Amazon?

Womack’s Herring has specific ideas about how distributors can outperform Amazon. “We have to continue to innovate and make sure we’re on top of the Internet of Things. Our associations and buying groups can help us with the manufacturers, especially when it comes to what manufacturers are selling through Amazon. We need to make sure we’re competitive. At Womack, we monitor that ourselves.”

Johnston suggests that manufacturers also support distributors by standardizing product data and providing images, in addition to policing prices offered through Amazon.

Others, like Good Energy’s Feith, advocate for more ambitious marketing. “I put together a marketing team last week at GoodMart—six people volunteered. We conducted a SWOT analysis at our first meeting and it was excellent! We’re now working together to develop a strategic marketing plan.” GoodMart is the electrical distributor sister company to Good Energy.

Winning, In a Nutshell

Advice from these marketing experts for combating against Amazon can be summed up as follows:

  • Compete where you can win. Don’t try to win on price. Don’t pursue customers you can’t get and probably don’t want. Compete on customer service, expertise, and value-added offerings.
  • Use industry resources to your advantage. Associations and buying groups can help distributors by providing information and monitoring pricing to ensure a fair marketplace.
  • Cultivate relationships based on familiarity, friendship, respect, and likability.
  • Become a better marketer. Master your craft through reading, coursework, online classes, workshops, webinars, and the vast amount of free information available online.
  • Look ahead and plan accordingly. Even if today’s contractors don’t care (so much) about online ordering, tomorrow’s will.

In short, marketers need to proactively address threats from Amazon and any other competitors in their markets. Companies who step up their marketing game will be the winners in the next five to ten years. But it’s not going to happen organically; it requires an investment in tools, training, and people. What is your company doing today to beat Amazon tomorrow?

 

Competitive Analysis of Amazon

When asked to describe the Amazon brand, class members used the words “everything,” “fast,” “easy,” “one stop,” and “global.” Here’s what else they came up with:

Strengths
Broad inventory
Easy to order
Competitive prices­­
Shipping
Peer reviews
Not limited to certain lines
“Open” 24/7

Objectives
World domination
Making money
Make it easy to do business with them
They want you to think of them first
One-stop shopping
Get anything: groceries, clothing, electrical products

Weaknesses
Not personal/no (continuing) relationship
No advice or experts
Lack of professional knowledge
No value-added services
No customized ordering
No custom services like kitting, staging
Can’t visit customer site/give recommendations
Limited breadth of product line
No tools and apps
No product selection guide
Don’t work directly/sell and ship directly

Marketing Strategies/Tactics
TV ads
Internet
Ad search words
Pop-ups while browsing
Free freight
2-day delivery
Movies/entertainment
Gift card in trade magazine ads
Going after verticals/niche industries
Automatic monthly reorder
Amazon/EC

How Distributors Can Maintain Market Share
When facing competition from Amazon, these distributor marketers plan to focus on personalized and customized ordering and other services. Distributors can finance jobs, alert customers to price increases, and offer invoicing compatible with customers’ accounting systems. Further, because distributors understand customers’ needs and market in a way Amazon cannot, they can also offer business solutions. Finally, because of their personal relationship with customers, distributors can bring customers new business and resolve any issues that may arise.

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Katrina Olsonis a marketing and public relations consultant, trainer/coach, and host of a monthly podcast called Market Boldly, available on iTunes and Google Play. She has written for tED magazine's print edition since 2005, judged tED magazine's Best of the Best Competition since 2006, and also writes for the new lightEDmag.com and lightED Weekly. She can be reached at Katrina@katrinaolson.com or via her website at katrinaolson.com.

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