Amazon launched its B2B service, Amazon Business, into the UK market. The development will cause seismic changes in the sector. Let’s dive in.
Over the past two years we have been warning the UK retail supply chain that they will soon be doing business in a market where eCommerce giant Amazon is a formidable competitor. And this week our prediction became a reality as, having successfully launched its B2B offering in the US and Germany, Amazon launched its B2B service, Amazon Business, to the UK market.
The development will undoubtedly cause seismic changes in the sector, altering the expectations of wholesaler’s and Third Party Logistics (3PL) customers that will now have the option of working with a recognised eCommerce brand. Ultimately this means that existing organisations in the supply chain will have to adapt their way of conducting business.
The first question that wholesalers now need to answer is do they view Amazon as friend or foe? This is because in addition to its own wholesale and distribution offering, Amazon also has a B2B marketplace which, much like its consumer arm, offers existing businesses in the sector a range of opportunities and benefits.
These include the possibility to develop an additional revenue stream, engage with and acquire new customers, develop a platform for stock clearance and trial selling into new territories internationally. This all comes with Amazon handling the delivery, international shipping, packing and handling the returns process. While many are likely to be sceptical of this approach it’s worth noting 50% of Amazon’s sales come through the marketplace, in turn creating over 100,000 businesses with annual sales of $100,000.
Of course selling through Amazon should also be approached with some caution as they take a commission and charge for these services, which as an example, can see them take £4.11 from the sale of a £10 toaster, eating away at precious margins.
And beyond the impact on the bottom line, selling through the marketplace enables Amazon to gain a unique insight into your business that they can then use to enhance their own offering.
Our advice is if you’re going to get in bed with Amazon it’s be wise to sleep with the light on… if not, with your eyes open as well!
If, after weighing up the benefits and risks, a wholesaler decides that Amazon should be viewed as a fearsome competitor they will need to find new ways of remaining competitive and of adding value to their customers – and quickly!
The good news is, this is mission critical rather than mission impossible. Digital technologies fuelled the rise and rise of Amazon – and with the use of sophisticated IT, wholesalers can still compete against it.
First and foremost wholesalers must now stop resisting online, which they have done for too long, either because they believe their business is too complicated or eCommerce is not relevant to their products or services. It’s a view that has prevailed despite some of the UK’s best performing wholesalers and distributors, such as Nisbets and Screwfix, using IT to gain a competitive advantage.
The latest B2B eCommerce Solutions for wholesalers and distributors incorporate all the functionality offered by Amazon and more: Account management, multiple online ordering methods, real-time stock inquiries, live order tracking, delivery information plus click-and-collect. Wholesalers should embrace this technology and integrate with Order Management solutions developed to meet the exacting needs of today’s consumers.
Second wholesalers and 3PL’s need to remember that for all Amazon’s strengths – and financial clout – there are weaknesses in its current business offering. Existing wholesalers are specialists in their chosen sectors and will have a deep knowledge of the products and the market, as well as a detailed understanding of their customer’s needs, that Amazon cannot match. And that is unlikely to change anytime soon.
Amazon don’t offer customer-specific pricing; you can’t phone Amazon Business for advice as they don’t have a B2B customer service call centre, and they don’t have the niche technical knowledge about the products that you do. What’s more they don’t have sales people that can actually visit customers and build personal relationships, and they don’t have physical outlets. Our recommendation to UK wholesalers and distributors is to immediately start playing to your strengths: Excellent Customer Service.
With Amazon now here and operating in the UK B2B supply market, we can also be sure that they will invest heavily and for the long term in technology and infrastructure to create the economies of scale on which they thrive. But by levelling the technological playing field, capitalising on Amazon’s weaknesses, and playing to their own strengths, UK wholesalers and distributors will be able to genuinely compete, and thrive, as they battle with the world’s largest online retailer.