Summary of: Your Amazon Business Strategy Evaluating the Friend or Foe Equation, by Ian Heller, MDM President, and COO
Ian Heller, President, and COO of MDM gave a great talk to a packed room. Every seat was filled and about 30 people, including yours truly, were left standing throughout the entire session.
Ian talked about Amazon’s b2b strategy. He suggested that Amazon will continue to leverage other people’s money to grow, scale with technology vs. people, and choose strategies that help them avoid antitrust issues. Here are some of the top takeaways:
- Amazon will continue to focus on “tail purchases” (simple orders) so as to avoid antitrust scrutiny.
- Amazon has already duplicated part of a distributor’s value proposition – better service. As proof, Ian pointed out that Amazon already offers same-day delivery of over 1M items. They also provide up to 60-day credit terms, allow multiple users on the same account, provide free shipping, support buyer approval workflows, provide strong reporting and analytics and provide discounts to GPO’s and associations.
- While many distributors struggle with the fast (and expensive) pace of technology change; Amazon is leading the development of technology, be it advances in distribution or automation, or the use of artificial intelligence, virtual reality or drone delivery systems.
Marketplace implications for distributors are potentially both positive and negative. On the positive side:
- Amazon has opened large markets to distributors.
- This provides an opportunity for distributors to grow by selling online through Amazon Marketplace. An “if my competitors are doing it why shouldn’t we” thought process exists.
- Antitrust laws are in place and could help make Amazon behave.
On the negative side:
- As Amazon continues to pursue tail purchases, distributors will lose the opportunity to develop those critically important customer relationships.
- Selling through Amazon, as attractive as it may be, provides Amazon critical data about who your customers are and your pricing and margins. This allows them to identify and ultimately pursue the most lucrative markets.
- Disintermediation is the logical result with the inevitable elimination of the middleman. That’s you; and by association me.
Ian addressed, in a tongue in cheek way, the question “Can you trust Amazon?” He then went on the say that you can trust Amazon to:
- Do whatever it can to increase its profits,
- Put its stakeholders ahead of you, and
- Remain obsessed about adding customer value in new ways.
In conclusion, Ian provided some guidance as you develop your Amazon business strategy:
- Don’t be fooled about Amazon’s marketplace. While by participating you can increase sales, you are also providing Amazon, your biggest competitor, a lot of data.
- Do what you can to offer service value not easily replicated online.
- Buy and master the best technology you can afford.
If you are looking for more direction regarding Amazon or any of your marketing strategies, we are here to help.