Welcome to the second of our Amazon in Australia series! This series of articles explores e-commerce in Australia, and how Amazon will affect Australian wholesalers and distributors. Our second article in this series will explore the impact of Amazon Business on Australian intermediaries. Click here to read the first article of the series.
Jeff Bezos, founder of Amazon, had a vision for the company to skyrocket and dominate e-commerce. Amazon emerges as the largest apparel retailer in America, steamrolling a growing list of retailers. What does this mean for wholesalers and distributors working in a traditional B2B market?
Since its launch in 1995, this behemoth retailer has disrupted traditional sales and distribution channels. One such disruption that intermediaries should pay attention to is Amazon Business. Amazon is investing heavily in allowing business buyers to purchase their goods in the same way as consumers do on Amazon.com. They created Amazon Business with the aim to digitally support traditional B2B workflows and customers’ buying expectations.
What is causing Amazon Business to grow so quickly?
What is causing this boom for Amazon Business? According to Rob Green, director and general manager for Amazon Business, there has been a demographic shift in the workplace. Green notes that a majority of millennials in the US are buying online through their phones and are taking this buying habits into their businesses. This has prompted Amazon Business to enable customers who are using their phones or tablets to order products easily and more conveniently.
There has also been a shift in their customers’ purchasing behaviour. Amazon Business has been selling to various industries, including pharmaceutical, restaurants and telecom among many others. Initially, they bought items such as office supplies but have begun to buy bigger ticket items. One such example is the food service supply area where buyers used to buy commodity items and are now purchasing higher value items such as ice makers for $10,000. Furthermore, companies increased their purchased quantities; instead of ordering a re-supply, they are now ordering pallets of products.
How is Amazon Business leveraging their success?
Creating B2B Workflows and Functionalities
Adding key features and functionalities that business buyers and sellers need, such as tiered pricing, increases Amazon Business’ value.
Acquiring Key Business Buyers
Amazon has secured a major public sector contract that enables buyers at public agencies and nonprofit organisations to buy items they need through Amazon. They also have a growing sales team out in the field to build up the marketplace ecosystem for B2B.
Integrating with Procurement Systems
Amazon is integrating with various common procurement software platforms used by corporate and institutional buyers. This allows business buyers to use their existing enterprise resource planning systems and other business software to manage purchasing from Amazon. This means business buyers can now easily buy things off Amazon without disrupting their existing procurement workflow.
What does this mean for wholesalers and distributors?
It has been reported that the number of business product-related searches on Amazon has now grown to equal the number of searches that begin on distributors’ sites. Amazon is also beginning to take search origination share from Google and Bing.
More business buyers are finishing their shopping journey on Amazon too. As of the first quarter of 2017, almost 40% of B2B buyers are finishing their purchases on Amazon. This is a stark contrast to the 16% of business buyers who are finishing their purchases on distributor sites. Buyers are evidently attracted to sites that have a wide selection, are easy to use, and built-in trust.
Green suggests that one of the ways to compete with Amazon is to sell on Amazon. This might seem counterintuitive but in doing so, wholesalers and distributors don’t need to worry about holding inventory, or managing e-commerce and fulfilment functions as Amazon acts as a fulfilment centre for thousands of businesses.
While there are no news about Amazon Business in Australia yet, will your business have a strategy in place to compete or complement Amazon Business?
Part 3: Formidable Amazon and the Threat to Intermediaries
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.