Amazon Business Means Business – Distributors Be Advised
Q: What did Amazon launch on April 28th?
A: Amazon for Business was a launched last month and suggests significant impact to B2B distributors everywhere.
Why? Because Amazon is making it as easy for a business to order from Amazon as a consumer can on the standard Amazon site.
Q: How is Amazon making it easy for B2B online?
A: Five improvements will have significant impact:
- Amazon Business is selling where the customers are – online
- Extensive search and well designed UI screens
- Free 2 day shipping on orders >$49
- Business prices
- Approval workflows
1. Amazon is selling B2B online – where the customers are
Unlike many mid-market distributors, Amazon is offering the ability to order products online. Rather than wasting time placing orders by phone or by fax (hard to believe that B2B still happens by fax), purchase departments get the simplicity and time savings of ordering online
Why is online selling important?
Online selling enables procurement departments to carry forward a behavior that minimizes unnecessary contact. As we have mentioned in the past, over 50% of a typical B2B purchase decision is made without ever picking up the phone or contacting a rep. Why wouldn’t purchasing officers want to carry this behavior forward to purchase?
2. Extensive search and well designed user interface
Amazon knows how to help users search for products. Years of testing has given them a skill set and a technology base second to none.
Why is search and User Experience (UX) so impactful?
- 68% of B2B buyers now purchase goods online, up from 57% in the 2013
- 30% of B2B buyers report they research at least 90 percent of products online before purchasing, up from 22% in 2013
A simple, easy-to-use user experience is increasingly a competitive weapon in the online/offline world. And Amazon continues to improve its purchase experiences with various subscription and cross-sell/upsell services that leverage your purchasing history.
Everyone only has 24 hours per day. Buyers will move toward those platforms that make their shopping experience easy and streamlined, assuming price comparability.
3. Free 2 day shipping for orders >$49
Amazon Prime comes to B2B.
Why free shipping is important?
Do we really need to explain this one? One of the holy grail advantages of distributors — “quick and cost-effective delivery to your door” – is shot full of holes.
4. Business Prices and Products
The old complaint that kept businesses from selling on Amazon was the lack of a tiered pricing capability to hide wholesale prices from end customers. No longer. Manufacturers can set prices for B2B customers as distinct from what an end customer would see.
Why is business pricing important?
Businesses want to protect prices across the supply chain. Amazon provides pricing tiers to ensure that business prices are not visible to consumers. Consumers register differently than business buyers. The old saw that Amazon does not support business processes is now inaccurate.
Why are business products important?
The traditional defense by distributors was that Amazon does not carry what the B2B customer needs. That no longer holds up as easily. Amazon is carrying millions of products that they never carried before, specifically for B2B.
Here is an early set of product categories found on their website:
“office products, electronics, software, books, janitorial, industrial, grocery, food service, appliances, safety tools, home improvement”
5. Business approval workflows
Users of Amazon business can implement procurement workflows that mirror corporate policy. Before Amazon may have argued price over policy. No longer. Policy is important to Amazon.
Why are approval workflows important?
Business buyers would not take price over policy. Now with policy workflows, business buyers can maintain policy while getting low prices and 2 day free shipping
Q: So is my company at risk?
A: Depends on what you mean by risk. Here is a quick test:
- Go onto Amazon Business and see if your customers’ products are available.
- If yes, you at considerable risk. Get an online presence in place – fast.
- If no, you have a little time before the impact hits. But the effect is coming.
We would strongly caution on against relying on your brand or perks such as extended credit to blunt the impact for long. Recall that 42% of all online shoppers currently type in “amazon.com”
Here is a little case study reported by Bloomberg. It is safe to assume that this mindset is happening all over the country. In particular, note what the administrator says:
…[take] Tulsa Community College, which is using Amazon to order test tubes, basketballs, office supplies and other goods, instead of having employees fetch them from local retailers or specialty sellers.
The day-to-day needs of the 15,000-student school translate into about $10,000 in orders a month, a number that keeps growing as more staff embrace e-commerce to buy things they need, according to Terry Lastinger, assistant director of purchasing at Tulsa Community College.
Amazon makes it easy to delegate the procurement process while maintaining policy. And they all know how to use Amazon’s UI.
Contact us to discuss how we might assess the threat and the effort to compete effectively against Amazon.