It’s a question more and more distributors are asking themselves: “Should I partner with Amazon?”
The answer is an unequivocal “maybe.”
For some, making product available through the online giant is a sound business decision, one that can substantially boost revenue. But I’ve seen the opposite happen, too. In fact, it’s not unheard of for distributors to lose money selling through Amazon.
Amazon isn’t going away, and individual distributors can’t out-Amazon Amazon. But, it’s important to remember that wholesaler-distributors provide services and benefits that Amazon can’t, like value-added services, special invoicing, local presence and customer-specific support.
To determine whether partnering with Amazon is a good idea for you, it’s essential to start with customer data. And for that, you need the right technical platform, one that will allow you to drill down into the details of your customers’ behavior. There are many analytics tools available today, and for most distributors, those are a worthwhile investment.
Those tools allow you to analyze what your customer bought this week, what they bought last month, and last year. That way, you can begin to understand whether you’re losing business to Amazon, and, just as importantly, what portion of your business.
Let’s assume that the analytics indicate that you are losing wallet share to Amazon. The next step will be understanding what the impact of that lost business is, and why you are losing it.
It’s important to remember that working with Amazon is not as simple as offering to sell merchandise through their platform.
If you list an item on Amazon and it’s not selling, Amazon may opt to end its relationship with you. On the other hand, if you list a product on the site and it sells like gangbusters, you may be vulnerable to having that product scooped up by Amazon. The online giant is famous for its highly advanced sales analytics. And, of course, it has its own private label. So, if there’s a market for your product as a private label, Amazon is likely to take it as their own.
Those caveats aside, there are times when listing on Amazon will benefit you.
Often, listing just certain items on Amazon is the best route. And, again, using analytics, you can determine exactly what those items are. Basically, anything that is a low-margin or that doesn’t fit into your core portfolio would be a candidate for listing on Amazon.
Another perfect fit would be goods that you have exclusive ability to procure – maybe you use a small supplier who works only with you. Also, if you’re trying to break into new territory, listing on Amazon may be an inexpensive option for that.
Partnering with Amazon isn’t the answer for everyone. But when used strategically, Amazon can be a distributor’s new best friend. The key is analytics that shed light on what customers are buying from you, what they value that you provide, and which products, if any, would be candidates for listing on Amazon.
Armed with that information, you may decide that partnering with Amazon makes sense for you. Or not.
Either way, you have to have the data to make it work.
About Contributor Matt Petersen
Matt Petersen is Microsoft Business Applications Partner Sales Lead, Americas. He was previously the Senior Director of Industry Solutions for ENAVATE and has spent his entire career in the enterprise software industry. Matt was a founding member of the SAP for Wholesale Distribution Industry Business unit and in 2014, he joined Microsoft to lead the U.S. Dynamics Retail and Wholesale Distribution Industry practice.
Matt has a Bachelor's Degree in Economics from the University of Illinois in Urbana - Champaign and a Certificate in Distribution Management from Texas A&M as well as a Certification from INSEAD in Business Strategy and Financial Acumen.