In the last year, I’ve given keynote speeches in Milwaukee, Orlando (twice), London, Las Vegas, Cleveland and Miami. I’ve also participated in dozens of calls, webinars and conference calls with distribution executives, management teams, analysts and students studying distribution. The most common question I get is, “Do you think distributors should sell on the Amazon Business Marketplace?”
I wish I had an easy answer, but there is none. Instead, my answer usually depends on who’s doing the asking.
Minority & Women Owned Distributors
If you are a minority- or women-owned business, then yes, you definitely should. As long as Amazon remains an enormous, publicly held corporation, it will never be either minority- or women-owned and so, like all major corporations, it has various reasons to support these kinds of enterprises. So as long as your company fits this definition, you’ll probably gain many benefits from becoming a marketplace seller.
Distributors with No E-commerce Capability
If you have no e-commerce capability, you probably should, too. First, shame on you for falling so far behind (hey, it’s nearly 2019), but if that’s where you are, then you probably need a partner to promote your goods online and Amazon is the biggest player out there. The problem is, if you have no e-commerce, you probably can’t provide Amazon with the product data and other requirements you need to meet to be successful. But if you qualify and can meet the requirements, then go ahead.
It may help you feel a little better that, In a recent survey we completed with the e-commerce provider BigCommerce, 23 percent of respondents answered that customers “cannot realistically use our website for their regular purchases.” The respondents came from larger-than-average companies, so this is probably a best-case scenario. (You can view the webinar where we covered the survey results here.)
Distributors Who are Succeeding at E-commerce
Only 28 percent of the respondents to our survey fit this category, but if you’re in this group, then, in my opinion, you don’t need to sell through any marketplace, including Amazon’s. The challenge for you will be to continue to succeed as customer expectations increase and competitors put new technologies in place. Voice ordering, for example, is going to become a more common capability. Customers can also point their phone cameras at items today and the Amazon app will recognize the product and take you to the ordering page.
But if you’re happy with your e-commerce results so far, my recommendation is to continue developing your capabilities – and keep your online future in your own hands.
Distributors with Limited Capabilities or Disappointing Results
If you have limited e-commerce capabilities or you are frustrated with your results, the answer gets a lot tougher. According to the same survey, 49% of companies say they are in a gray area where they have built e-commerce websites but those sites are not meeting their objectives. (In case you’re keeping score, that means 72 percent of distributors either have no e-commerce website or are unhappy with the results they’re getting.) So what should these companies do about the temptation of selling on the Amazon Business Marketplace? Let’s explore the upsides and risks.
The potential benefits are very appealing: you can gain exposure to a vast market of customers, most of whom either don’t know about you or aren’t buying online from you today. You can likely liquidate some excess or aged inventory. You can learn a lot about e-commerce by partnering with the best and most sophisticated online seller in the world.
The bottom line is, well, the bottom line: You’ll probably grow your sales – maybe by a lot. And according to a survey we did earlier this year, distributors who sell on Amazon are generally pleased with the results. If you’re a subscriber to MDM Premium, you can read the results of the survey here. (If you’re not a subscriber, you should be – with all the disruption rolling through the industry, you need the analysis and insight from our flagship publication.)
The risks, however, may be significant. When you sell on an Amazon Marketplace, you are exposing that transactional data to one of the most sophisticated and aggressive companies in the world. What if they use your data to figure out what you sell, who tends to buy your products and what prices they can charge? What if they use that information to buy directly from your manufacturers? The bottom line is, you have to decide if you can trust Amazon to be a good partner.
Trust and Antitrust
One thing that seems to be changing the equation is the increasing risk of the company facing antitrust issues. This past Sunday, President Trump said in an interview that his administration is “very seriously” considering antitrust action against Amazon (and Google and Facebook). If you watch television, you may have seen a recent Amazon ad promoting how small businesses everywhere are growing sales through its marketplace. This suggests to me that the company will be careful about displacing its third-party sellers – if for no other reason than to be less of an antitrust target.
I’ve written about this before, but Amazon doesn’t have a great track record when it comes to large-scale partnerships. The big wild card now is that the company faces the only opponent it can never defeat: the Federal government. You must take this into account as you factor Amazon Business into your business strategy. Any company under FTC scrutiny is much less likely to take actions others would consider “predatory”.
Frankly, these decisions would be much easier if Amazon would simply develop and announce a policy around the long-term prospects for its marketplace sellers. I’d like to see the company take an official stance on how it will compete – or not – with its partners. What are the conditions under which it will buy products directly that it formerly sold through marketplace participants? How will it use the vast amounts of data it gets from these sellers?
I don’t support antitrust action against Amazon because, while they have enormous scale, the company really does support some 1.7 million sellers on its two marketplaces. However, until the company makes known its long-term intentions for those sellers, the risks for distributors selling on an Amazon marketplace remain unknown. And, in my opinion, this vagueness increases exposure to antitrust regulation.
If you haven’t yet signed up for our upcoming forum,“How Distributors Should Respond to Amazon Business,” you should consider it. It’s in Denver on December 4th, 5th and 6th; our lineup of experts will give you more insight into Amazon Business, the risks, the potential benefits and the alternatives than any other conference. I know it’s a busy time of year, but someone from your organization needs to participate. I hope to see you there.