Amazon - Your future partner or competitor?

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

Until 2015, Amazon was primarily operating in the B2C market. However, it has successfully entered the B2B market in the last three years. So 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, 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 sell 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. Of course, you can also choose Amazon to handle this for you. 

Amazon Vendors

As an Amazon Vendor, you'll be part of a 1st party solution where all partners must 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, selling products via Amazon has some apparent benefits. 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 signing up as a partner, you should consider some disadvantages of selling on a third-party platform. Companies joining the marketplace will miss out on opportunities for customer engagement and lose 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 because 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 how to handle the big giant. 

If you haven't already, now is the time to decide whether Amazon should be your future partner or competitor. However, remember 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 discover they lost their products at a lower price and cheaper distribution. One of their local sales companies had made a deal with Amazon to become a vendor. As a result, Amazon could outperform the company on supply and distribution. The lesson they learned was to ensure they had all their contract with distributors, and local agents stipulate that they are only allowed to make deals with third-party distributors with permission from the head office. Are you sure you have all your agreements and contracts to keep something similar from happening?
• Does your company have sufficient internal knowledge and access to drive successful e-commerce? Many B2B brands need help figuring out what to look for regarding an e-commerce solution. I would like to examine the two different partnerships Amazon offers for these companies.
• How much do you invest today when launching sales in a new country? Starting B2B sales in a new country can be challenging. You need local knowledge, a good distribution network and marketing activities. Instead of spending considerable resources initially, Amazon can be a good option when entering a new country. They have built up excellent 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. For example, the orange platform's design may differ from your brand's aesthetic. Meanwhile, your products or services will be associated with the many other brands on the platform. If you partner with Amazon, you will not fully control 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. For example, if you sell via Amazon, you will lose essential customer data. 

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