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When companies such as Amazon Business invite other distributors to sell on their marketplaces, those companies have to trust that Amazon won’t use their sales and transaction data to source their products directly from manufacturers someday, according to MDM President Ian Heller in Decoding the Complexity of Amazon Business. Most former Toys R Us and Borders executives wouldn't endorse that bet.
Amazon and its ilk earn sales growth from their competitors. But partnering with Amazon Business Marketplace hasn’t always turned out well.
In 2001, Borders turned over its online business to Amazon – redirecting Borders.com to Amazon.com. Borders eventually went bankrupt. Toys R Us followed a similar strategy, including redirecting its website, and later sued Amazon for breach of contract and won a $51 million settlement. Toys R Us also filed for bankruptcy last year. The last of its stores closed last month.
"Some analysts say that the reasons these retailers went out of business wasn’t so much the strength of Amazon’s e-commerce capabilities as it was the failure to build their own robust online stores," said Heller. "In any case, both defunct companies are cautionary tales."
Companies should consider focusing on building their own e-commerce capabilities, even if it isn't the cheapest option.
"I often speak with distribution executives who say that it’s cheaper and better to sell through the vast capabilities of Amazon Business than it is to build their own," said Heller. "I would wager you could find many former employees of Toys R Us and Borders who would dispute that logic."
Read more in Decoding the Complexity of Amazon Business.