Amazon - Your future partner or competitor?

By Anders Björklund

Amazon - Your future partner or competitor?

Amazon's mission is to offer their customers the lowest possible prices, the best available selection, and the utmost convenience. Ever since the company was founded, in 1994, it has continued to impress with its rapid growth. Starting off as a bookstore, it has since become one of the world's largest global e-commerce platform and cloud computing company. 

Until 2015, Amazon was mostly operating in the B2C market. However, during the last three years, it has made a successful move into the B2B-market. When it launched the platform Amazon Business, it was easy to see that it would have a massive impact on B2B e-commerce. Today, Amazon's existence affects all companies and businesses to some extent−including yours. 

What is Amazon Business?

Amazon Business is a B2B marketplace, where businesses buy and sell everything from simple light bulbs to advanced lab equipment. For those who are interested in trading, they offer two different partnerships arrangements:

Amazon Business Sellers

As an Amazon business seller, you are selling your products on the platform as a 3rd party. You will set your prices and can decide whether you want to manage the shipment and customer service by yourself. You can also choose Amazon to handle this for you if you prefer. 

Amazon Vendors

As an Amazon Vendor, you'll be part of a 1st party solution where all partners need to go through an application process. If you get accepted, Amazon becomes the full-time distributor of your products. They will buy and store your inventories and fully control the pricing, shipping and customer service. 

At first glance, there are some obvious benefits of selling products via Amazon. You will get immediate access to a global market, a structured distribution network and the right tools for managing a thriving e-commerce business.

However, before you sign up as a partner, you should consider some of the apparent disadvantages of selling on a third party platform. The companies that join the marketplace will miss out on opportunities for customer engagement and loose insight into critical customer data since they pass off the buying and selling experience to Amazon. 

What is your Amazon strategy?

Many years ago we started to ask this question to our friends: 

Is Amazon your future partner or competitor?

We always knew that long-term, Amazon would have an excellent position to expand its offering based on that it knew its customers much better than most B2B companies. Now, since the launch of Amazon Business, there is no doubt that every company needs to decide on how to handle the big giant. 

If you haven't already, now is the time to decide on whether Amazon should be your future partner or competitor. However, keep in mind that there is no general answer to this, all decisions must be based on your company's unique situation and requirements.

What to ask yourself

Here are some initial questions for you to answer before you decide how to relate to Amazon. 

  • Some years ago,  one of our customers lost to Amazon in a public tender only to find out that they lost against their own products at a lower price and cheaper distribution. The explanation was that one of their local sales companies had made a deal with Amazon to become a vendor and Amazon could outperform the company on both supply and distribution. The lesson they learned was to make sure that they had all their contract with distributors and local agents stipulate that they not be allowed to make deals with third-party distributors without permission by the head office. Are you sure you have all your agreements and contracts in place to keep something similar to happen?
  • Does your company have the right internal knowledge and access to drive successful e-commerce on its own? Many B2B brands do not know what to look for regarding an e-commerce solution. For these companies, it might be interesting to look closer at the two different partnership that is offered by Amazon.
  • How much do you invest today when launching sales in a new country? Starting B2B sales in a new country is not always easy. You need local knowledge, proper distribution network and the right marketing activities. Instead of spending considerable resources in the beginning, Amazon can be a good option when you are about to enter a new country. They have built up great local knowledge and proper distribution from their global experience. 
  • How important is your brand? Selling via Amazon will limit your opportunities to build a strong brand. The design of the orange platform may differ from the aesthetic of your brand. Meanwhile, your products or services will be associated with the many other brands on the platform. If you partner up with Amazon, you will not have full control over how your brand is perceived.
  • Do you value customer data? Customer data can be critical for succeeding in your business. It allows you to analyse customer habits, expectations and behaviour and can give you a better understanding of your entire business. If you sell via Amazon, you will lose essential customer data. 

This was a short introduction on how to think about Amazon. Get in touch if you would like to know more.

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Anders Björklund
Founder, CEO & Strategist since 2001. Anders provides thoughts and reflections about what and how to think about onlinification and digitalisation in B2B. Asks a lot of questions, and knows what to do with the answers.
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