Six Strategic Steps Manufacturers and Distributors can Take to Compete with Amazon Business in EMEA
Posted by Gareth Carroll, EMEA Business Development Director, Oracle Netsuite
As Amazon Business continues to expand across the European B2B market, it is imperative that wholesale distribution and manufacturing companies create a strategic plan for survival in this new age of Amazon. Amazon Business has been on the scene since 2015, and it seems distributors are now starting to take notice of its impact on the B2B market. A recent report conducted by Unilog, surveying 250 manufacturers, wholesalers and distributors, found that Amazon Business was considered the number one threat to their businesses today. And yet, 52 percent still have no strategic plan for competing with Amazon Business.
This may be in part due to the platformâ€™s infancy. Despite its rapid growth, Amazon Business has only been in action for four years; it is possible executives are still adopting a â€˜wait and seeâ€™ approach, monitoring its development before making a plan. But, if Amazonâ€™s history of dominating markets is anything to go by, there is no time to sit back and observe. The time to act is now.
To aid development of your strategic approach to surviving the Amazon effect, here are the top six strategic options we believe you should be considering.
- Forming a New AllianceÂ
The nature of the Amazon Business platform means itâ€™s not a single company, but instead the lead partner in an alliance of thousands of suppliers. Amazon Business is the facilitator, bringing together specialist suppliers across multiple industries and enabling products to be sold via one single platform, creating ease and convenience for the B2B buyer.
In order to deliver a similar experience, competing distributors who do not have the desire to join the Amazon Business platform may want to consider forming alliances of their own in order to create a stronger competitive edge.
For example, collaborating with leading software companies could enable distributors to provide superior online capabilitiesâ€”delivering an Amazon-like customer experience directly, without partnering with Amazon.
- Quantify Your Exposure
Understanding the level of threat Amazon Business has over your organisation is a fundamental step in building your competitive strategy. Identifying your niche and existing unique competitive advantage is an essential first step, and should form the foundation of your strategy.
Understanding your exposure to Amazon Business will enable you to identify the key areas you can build upon to secure your place in the market against this latest wave of disruption.
As an example, obtaining exclusivity of distribution rights for certain brands that do not sell via the Amazon platform will strengthen your place in the market. Alternatively, you may consider creating value add by introducing a services arm to your business, with on-the-ground sales representatives that maintain a personal relationship with customers, to develop trust and loyalty.
- Invest in Research and Analytics
Amazonâ€™s business model is centred around its customer and their needs. One of the fundamental requirements for any manufacturer or wholesale distributor hoping to compete in the Amazon era is visibility into the customer base and customer behaviours. In order to deliver the same level of targeted, personalised, customer experience Amazon can offer, you must be able to see how your customers are buying, when they are buying, what they are buying and other key characteristics of your customer behaviour that will support effective business development and decision making. Understanding your customer is the key to delivering exactly what they expect.
Knowing your customer in depth requires both regular customer interaction and feedback sessions, as well as a solid technology foundation that accurately monitors your customer behaviours and provide real-time, up-to-date, accurate data across all key channels. This will allow you to combine this key data, effectively analyse the data and create actionable plans to improve customer satisfaction within a timely manner.
- Build Your Future Facing StrategyÂ
As highlighted in another post on whether Amazon is a threat or an opportunity, the need for digitalisation within manufacturing and distribution is more vital than ever. For distributors not yet operating online, Amazon is a significant threat, as it brings a convenience and ease to your customers that you are not currently offering. Strong digital capabilities are essential today, whether you decide to work with Amazon Business or build upon your own business capabilities in order to compete.
This isnâ€™t just about front-facing customer technology and ecommerce â€“ itâ€™s also about state-of-the-art warehouse management and inventory management, sales order management, customer relationship management, product data and online marketing tools. All of these tools are essential to building out your digital presence and being equipped to deliver the same level of customer experience your customers will receive if they shop via Amazon Business.
- Define a New Business Model
Whilst digitalising your business operations is an advantage to competing in the Amazon era, and will enable you to deliver the same level of customer experience, it does not necessarily mean you need to abandon your traditional methods. It is not a case of replacing sales reps with online tools, but instead understanding the best mix for your business.
You need to identify the value your customers see in the services you are offering, and whether they are they willing to pay for them. Do they leverage the benefits of over-the-counter or telephone services, or are they more driven toward online interactions? Understanding these elements of your customer needs will allow you to adjust your business model and invest in the right channels, based on previous customer engagements.
With both a services and a product side to the business, operating all departments from a single-source of data is essential to functioning in a seamless and efficient manner, and delivering a consistent sales experience from all channels. But before you invest in online capabilities and additional on-the-ground sales staff, you should first quantify the value your customer is seeing in these capabilities and determine your ideal mix based on customer behaviour and customer demand.
- Invest in Integrated Technology
The secret to incorporating all of these key strategic areas is integrated technology. To deliver that seamless experience, to expand your business model, to introduce data analysis to your business requires tight integrations between all of your systems, across all channels, both in the front and back end.
For any manufacturers and distributors that think they may be at risk of losing their customers to the Amazon Business platform, the secret to surviving in the Amazon era is a centralised system with robust, accurate, real-time data to form the core of their business operations. This in turn will enable you to introduce other software advances that will further aid your innovation, such as the Internet of Things and Artificial Intelligence.
Itâ€™s this single source of the truth that will power a seamless experience, and allow you to increase your average order value with personalised promotions, and build your customer satisfaction and customer loyalty through trustworthy service delivery, superior product offerings, and quick and easy delivery.
Above all else, you should start to plan your strategic approach as soon as possible. If there is even a slight possibility that Amazonâ€™s move into B2B may impact your business, and there is a risk of your customers migrating, you must be prepared to protect your revenues.
For a deeper look into these potential strategic options and how you can build your competitive strategy in the Amazon era, download our guide Amazon Business: The Challenge Facing Wholesale Distributors and Manufacturers.