

By
Andrew Butt
August 17, 2022
The rise of Amazon Business has B2B distributors rattled. To compete, B2B wholesale distributors should focus on the things Amazon can’t provide—using the Deal Economy as fuel.Amazon Business has posed a growing threat to B2B distributors since its launch in 2012. Gross merchandise volume at the ‘Everything Store’s’ B2B division has increased 10x in two years, from $1bn in 2016 to $10bn in 2018. Bank of America estimates it will further triple by 2023, to $33.7bn.With the rise of Amazon Business, B2B distributors have been feeling the squeeze in terms of lost business and downward pressure on prices. When MDM asked 167 distributors about their current concerns for its 2019 Outlook for Wholesale Distribution, ‘Amazon’ featured prominently among their responses. Others included price pressures and margin deterioration; both symptomatic of a market where Amazon’s low-price ecommerce offering is eating into distributors’ revenues and profits.
A case of ‘if you can’t beat them, join them’—or is there a better way?
It’s clear B2B distributors need to do something—but what? Strategies that have been floated include ‘beating’ Amazon by setting up rival industry marketplaces, and ‘joining’ them by using Amazon Business as a channel to market for commodity products.These strategies assume that Amazon’s model is the right one, and that to compete, B2B distributors should also move further into low-price e-commerce. But Amazon’s model is only the right one for customers who know what they want to buy, and who want to pay as low a price as possible for it.That’s OK for undifferentiated, commodity products. But as soon as the customer needs expert advice, or help selecting a specialist product, or contract support, or any of the other value-added services that B2B distributors excel at providing, Amazon can’t help.That’s why B2B distributors keen to beat Amazon should double down on the facets of their business that Amazon can’t provide, and which its model explicitly precludes. Those fall into two broad categories: the customer proposition and the supplier proposition.
The customer proposition: expert knowledge and tailored services
B2B distributors have built many solid customer relationships in which they are seen as expert and trusted partners. Those customers rely on their B2B distributor partner for three things that Amazon can’t (and, more importantly, doesn’t want to) provide:
By focusing more deeply on these areas of their business, B2B distributors can develop an attractive, customer-centric value proposition that Amazon can’t match.
The supplier proposition: market insight and margin opportunities
Many B2B distributors are nervous about suppliers jumping ship and selling everything through Amazon. But in truth, B2B distributors have a huge amount of value to offer to suppliers that the ecommerce giant can’t. These include:
The Deal Economy: the fuel that drives Amazon-beating business
Combining the customer proposition and supplier proposition will allow B2B distributors to offer the right products, in the right way, with expert value-added services, to help the customer deliver an exceptional project for their own customers. That’s not something that Amazon Business can or will ever be able to offer.There’s just one thing missing to turn this Amazon-beating proposition into a win-win-win proposition for suppliers, B2B distributors and customers. It takes the form of intelligent trading agreements that deliver financial benefits to all parties:
We call this universe of B2B trading agreements the Deal Economy, and while it certainly exists today—in the form of special pricing allowances and other forms of rebate—it’s not used to anything like its full potential.Today, the complexity of negotiating, managing and claiming on hundreds of individual trading agreements mean the best deals aren’t struck, or suppliers end up in disputes with distributors, or wholesale distributors fail to claim the full amounts due to them. It creates friction and loss between the parties, rather than smoothing the path to success.But it doesn’t have to be that way. At Enable we’re on a mission to help wholesale distributors, suppliers and customers make the most of the Deal Economy. Our cloud-based B2B rebate management platform, Enable, is specifically designed to help all parties including B2B distributors maximize the value of their trading agreements—and in doing so, develop a sustainable flow of profitable business for decades to come.
Find out more about Enable
To learn more about how Enable can help B2B wholesale distributors compete with Amazon by maximizing the value of their supplier trading agreements, click here.