In the wake of Amazon's announcement that it will offer a Prime option with unlimited free two-day shipping to Amazon Business customers, some distributors' reactions may be to shift more resources to field sales functions. Don’t make that mistake.
What these distributors are forgetting is that Amazon isn't winning by selling – they're winning by making it easier for customers to buy.
Distributors that want to avoid revenue leakage to online-only competition will react with data, not fear or impulsivity. They will assess how much of their business is susceptible to this leakage and examine which of their customers' needs are going unmet or under-met, and only then will they invest their resources accordingly.
For many, this will mean shifting more resources to online purchasing capabilities, but most won't need an expensive ERP or e-commerce system. Instead, they will need the wherewithal to identify with data which digital tools make the most sense for them.
Distributors that embrace data and digital tools will have a fighting chance at patching up revenue leakage and will be positioned to lower their expenses faster than their prices. This is how distributors will stay relevant and fight today’s margin pressures, but this isn't how they'll beat online competitors. They'll win by investing in an area where Amazon and others like them can't easily compete: services.
Many of you probably have an Amazon Prime membership for personal purchases, or you've at least purchased from Amazon in the past. If you're a manufacturer, perhaps you're selling through the online giant. In all of your experience with Amazon, when was the last time you called one of their customer service reps to get advice on a product, application, new regulations or other industry- or product-specific information? I'm betting never, because Amazon's specialty is supply, not services.
This weak spot in Amazon's business model may not last forever, but distributors would be crazy not to take advantage of it by investing in the services side of their business. Distributors that embrace digital, emphasize monetized services and de-emphasize selling will improve their competitive position. They'll also enjoy reduced customer churn when sales reps leave, increased resources to offer more reliable service and more time for outside reps to disrupt competitors.
Distributors can't survive this ongoing digital disruption by relying on the same strategies they've relied on in the past. They must find new ways to capitalize on the knowledge and services they have always provided, all while embracing buyer autonomy. And they must do it now.
Mike Marks is managing partner of Indian River Consulting Group and specializes in helping distributors and manufacturers accurately diagnose problems and identify risk-bound alternatives, so they can take their next steps confidently. Call IRCG at 321-956-8617 or visit ircg.com.
For more on this topic, read Ian Heller's latest article, Amazon’s Prime Target: Your Business.