Amazon Business Launches as a Scale-up of Amazon Supply
Around this time last year, we published a reaction piece to a Forbes article titled, “Amazon’s Wholesale Slaughter.” At the time, there was still very much buzz around Amazon’s 2012 launch of AmazonSupply, the B2C giant’s B2B eCommerce play. Indeed, with wholesale eCommerce sales generating $1.96 trillion in 2013 (compare that to retail eCommerce sales at just $304.9 billion in 2014), Amazon is looking to claim a piece of a much larger pie. Well this week, the internet has been abuzz yet again with the news on Tuesday that Amazon had replaced AmazonSupply with a new and improved wholesale offering, Amazon Business. With the transition comes a much wider product selection for businesses of all sizes and industries, as well as new features like free shipping on orders over $49. If you sat in on our recent webinar on B2B eCommerce, you’re probably not all that surprised by these developments. The same conveniences that made eCommerce a success in the B2C realm are quickly seeping into the world of B2B sales, and wholesalers looking to stay competitive are learning to adapt to shifting buyer expectations. Let’s take a closer look at the latest developments at Amazon wholesale, and what they might mean for your wholesale business.
What Amazon Business Will Offer B2B Customers
According to E-Commerce Times and Amazon spokesperson Lori Richter, Amazon Business will offer over 250 million items, in contrast to the 2.25 million products on Amazon Supply, which were largely confined to categories like hardware, scientific/lab equipment, and office supplies. In addition increasing their product offering a hundred times over, the company is trying to adapt to the needs of B2B customers (who must have a business license to register for an Amazon Business account). This includes, for instance, the ability to speak with a real person about a purchase. With a new feature called “Live Experts,” buyers can consult representatives of a particular manufacturer via live chat. It remains unclear how effective this service will be at providing B2B buyers (who are often making large, expensive, highly technical purchases) with all the information they need to make a purchase. Amazon Business will also offer personalization by industry vertical, like construction, manufacturing, healthcare, education, and food service. Most notably perhaps, there will be free two day shipping on orders over $49.
So What Does This Mean for Wholesalers and Distributors?
1. You Need B2B eCommerce Now If you’ve had any doubts about whether B2B eCommerce would have an impact on the way retailers and other B2B buyers make their purchases, Amazon’s foray into the space should be convincing enough evidence to change your mind. As we discussed in our previous post on the subject, B2B purchasing online will quickly become more and more commonplace, and the effective online marketing of wholesale products will be critical. According to the Acquity Group’s 2014 State of B2B Procurement study, 94% of business buyers are already doing some form of online research before making a purchase. In short, if your company hasn’t already begun implementing a B2B eCommerce channel, you pose a serious risk falling behind your competitors large and small. Likewise, in the face of Amazon’s high volume, low-margin strategy, it’s critical to have direct online channels that not only satisfy your retail buyers’ demands for the convenience of a 24/7 eCommerce site, but also streamline the routine reordering process for maximum efficiency. 2. It’s Important to Consider the Advantages of Direct vs. Marketplace While Amazon seeks to become a channel for suppliers to sell their products online, it’s also important to think about the pros and cons of their “Marketplace” B2B eCommerce model, vis a vis a “Direct” model (i.e. your brand or company’s own dedicated B2B eCommerce marketplace). As Pierre Mitchell and Jason Busch point out in their recent article on Spend Matters,
“Amazon casts itself as an e-commerce platform to suppliers, but that’s misleading because it’s really only a platform that enables the suppliers to connect into the Amazon channel rather than to any distribution network and end customer. It is a sell-side on-ramp beholden to the marketplace.” Third-party suppliers on Amazon Business with be competing directly with Amazon’s prices. Furthermore, they will also endure fees ranging from 6% to 15% on each purchase, depending on the order size and product category. The other downside to the marketplace model is the possibility of having your other competitors selling on the same exact platform. Amazon will serve as a kind of great equalizer; every supplier plays on the same field (except, perhaps, Amazon itself, who has a significant leg up). As a result, buyers will likely make their choices based on price (as is often the case on its B2C storefront)––an unsustainable situation in the long run. In a direct model on the other hand, buyers go directly to your portal to search and access your products. The B2B eCommerce site is dedicated to one brand’s products, marketing messages, product education, and other resources, without other distractions competing for a buyer’s attention. 3. Your sales and customer service teams will need to differentiate on service. Just as independent retailers have had to step up their game in customer service in order to differentiate from the likes of Amazon and other retail giants, wholesalers will have to provide a much more modern, convenient experience and excellent service to their retail customers. Despite Amazon’s “Live Experts” feature, a live chat or even phone call with a manufacturer’s representative will not have the same impact (i.e. achieve the same level of trust and assurance on the part of the buyer) as having a great sales rep building rapport and a longer term relationship with that buyer. B2B purchases are still built on trust and relationships, but wholesalers will have to leverage that point of differentiation more than ever before, by spending less time on the everyday transactional elements of each sale and adding value with the strategic insights and competitive intelligence that will help your retailers drive more business. Questions about the launch of Amazon Business and what it means for the wholesale industry? Let us know in the comments below.