Thriving in the Age of Amazon: The two most important questions
There’s an important question brewing for distributors as big, central supply houses like Amazon continue disrupting the manufacturing and wholesale marketplaces: Is Amazon the biggest and, possibly, the last challenge your business will face, or the best opportunity that will ever come your way?
At first glance, the answer is one or the other, with not very much middle ground.
The Amazon story has been building for years now, and most distributors understand the risk. They’re a big, massively tech-enabled company. For practical purposes, they have unlimited resources. They had a hand in creating the consumer-oriented e-commerce platforms that now set the standard for business-to-business relationships.
And they’re serious about moving in on distributors’ established business relationships and making them their own.
The famous author Douglas Adams had the first piece of universally good advice for anyone facing such a monumental threat: DON’T PANIC. But unless you’re a hitchhiker with the whole universe at your disposal and a consuming need to remember the number ‘42’, that only works if you have a plan in place to respond.
Recognizing the threat
The good news is that the overwhelming majority of distributors have a clear understanding of what they’re up against. One survey last year found that 92% recognized Amazon as a competitor.
“Wholesale distributors are at the frontline of a changing economy,” Supply Chain Dive noted in its coverage of the report. “Direct-to-consumer sales threaten their business models, which previously relied on shipping large amounts of inventory to brick-and-mortar stores or manufacturers for resale or use. Yet, online sales channels by nature remove the middleman—evident in the hundreds of stores closing nationwide—forcing wholesale distributors to adapt accordingly.”
The article is recent, but there’s nothing new in the story. As far back as 2014, National Association of Wholesale Distributors Chair Patrick Larmon said the industry faced “unrelenting competitive pressure from all directions," including “the pressure from new, powerful, and deep-pocketed online competitors moving into the traditional distribution space."
There’s a caution here for distributors who aren’t sold on the scope of the challenge, who aren’t quite convinced that Amazon is here to stay. Look no farther than video rental outlets like Blockbuster, camera companies like Kodak, or any food retailer competing against Whole Foods (now a part of the Amazon empire) for a picture of established businesses that figured they’d be fine in a hyper-competitive digital world…until they weren’t.
You can’t respond to a threat if you don’t recognize it, and there isn’t an established business anywhere that shouldn’t be looking over its shoulder.
Competitor or partner?
The second crucial question for distributors is whether Amazon is a competitor or a partner. These days, the right answer is “yes”.
The first step for any distributor is to build up the strengths and efficiencies that drew customers in the first place, and still give a dedicated, expert supplier a leg up against a commoditized competitor.
With seamless customer service, expert product knowledge, and an ability to anticipate customers’ needs—often before they’ve identified those needs themselves—you can and should position yourself as a trusted partner and advisor, far more valuable than a regular supplier. As those needs become more complex and specialized, you need to modernize your IT infrastructure to coordinate an avalanche of data and business intelligence and translate it into a superior customer service strategy.
There’s no doubt that you have to get your own systems in place. But increasingly, distributors are turning to Amazon as an extension of their own in-house capacity. Supply Chain Dive reported last year that, alongside the 92% of distributors who see Amazon as a competitor, 64% consider it a partner.
“Rather than turn away from services like Amazon Fulfillment, distributors appear to be embracing—albeit perhaps hesitantly—the service in order to remain competitive,” the publication notes. “At the end of the day, the distributor must sell the suppliers' product, whether through another company's digital infrastructure or not.”
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