You know AmazonSupply may be a threat to your wholesale distribution business, but you may not realize some of the basic rules of their business model. Take a look at what drives their decisions for stocking products, then use this knowledge to shape your own strategy to compete effectively with AmazonSupply.
Amazon is not a discounter!
They do not sell products at a loss. They may appear to be selling a product at a very low price, but often it is not the lowest price in the marketplace. Are you discounting your products and selling at a loss, then trying to make up the difference in other areas of your business? Don’t think of Amazon as a discount brand. Instead look at all of the components of cost driving your pricing to see how you can match their price, or focus on demonstrating the value of your total service to your customers to support your pricing.
Amazon does not (really) provide FREE Delivery!
Another misconception based on their website and checkout process is that customers get free delivery. This is not true. They include margin for delivery costs in their pricing or their membership programs (like Prime). They have implemented policies within their checkout procedure where if you have a low cost item in your cart, they will not allow you to check out without adding additional items which add up to a price point where the delivery costs are covered.
Amazon does not stock bulky or difficult to handle products!
Up until now most of their products are light weight, hand held and easy to process for shipment and delivery. You may want to review your product mix and then focus on the products you provide which do not meet Amazon’s stock criteria. It only takes a few minutes on their website to see if they offer your unique products. You really have the advantage in these product groups because you already have the operations and transportation in place to warehouse and move these items. Focus new marketing and sales initiatives around your items which Amazon cannot or will not sell.
Amazon Customer Service Representatives are trained to take the customers side!
They make it easy to reach support directly thru their website and online ordering platform. When a customer has a complaint or problem the phone representative’s work to quickly understand the customer’s point of view and do everything possible to take the customers side in the issue. How is your customer support staff trained? Are they easy to reach, and do they return calls promptly? Do you track trends in reported issues and how are you working to fix the root cause of those issues?
Amazon has great analytics data!
OK, this may not be very surprising, but wholesale distributors need the same type of analytics to compete with Amazon in their market. Amazon knows exactly how much profit they make on every item, and you should too. Most traditional wholesale distributors do not have good analytics data on an item by item basis. They may make a profit on some items, but take a loss on others which balance out to a small overall profit.
This is where your Enterprise Resource Planning software can help you level the playing field with AmazonSupply. Take the time and resources needed to dig into your product, inventory and transportation costs. Find where and how much the exact profits and losses per item are in your business. Then adjust your practices and sales to match Amazon’s, at the same time you are increasing profits and decreasing losses.
Our Distribution 20/20 tools can help you improve your business analytics capabilities! Contact Socius today to find out more and gain visibility to every aspect of your business.
Source: Is Amazon Supply a Real Threat?