Since I awoke one day to find “strategy” in my job title, I’ve spent a lot of time thinking about it. A lot of business texts have been written about it and, in fact, my employer devotes significant time each month to devising, updating and measuring the effectiveness of “strategy.” There is no shortage of instruction and consultants willing to advise you on how to best create and execute a strategy.
In spite of that observation, in a survey of distributors and wholesalers in multiple industries, conducted by Unilog (1) earlier this year, an astonishing 52 percent of respondents admitted to having no strategy for competing with Amazon Business – regarded as their biggest threat and concern.
Amazon Business is the B2B-focused part of Amazon and accounted for 10 of the $233 billion dollars in sales they did in 2018. That’s not bad for a business that has only been around since 2015. But, with 100 million products listed and a network of hundreds of thousands of 3rd party sellers, Amazon Business is a competitor worthy of some strategic thinking if you’re going to avoid being crushed. Since the parts business is 75% B2B (DIFM) and 25% B2C (DIY), it’s fair to conclude that the “business” side of Amazon is something to pay attention to.
I spent decades learning that the distribution chain was held together with the value that each step added. Inventory assortment, marketing programs, technical training, quick delivery, warranty and returns management – just to name a few. Inventory that is carefully managed to reflect the local vehicle population and forward deployed by the case and pallet to be within 30 minutes of everyone with a wrench is a value unique to auto parts and accessory distribution. The strategic part is how you capitalize of your strengths to grow your business by 15% or more in the age of digital distribution.
My company is bullish on digital distribution and we believe there is a profitable role for brick and mortar distribution to play in a world dominated by Amazon and other online sellers. In my latest column, I wrote about a business recipe for success in selling to, and through, online marketplaces. The major ingredients in equal parts are 1) great product content 2) inventory visibility and 3) ruthless efficiency of business processes. I’d like to add a little more color to that punch list.
When business and consumer customers enter the self-service world of online commerce, they rely totally on the product images, market copy, performance and physical product attributes and unambiguous fitment information to make a purchasing decision. An investment in enriched product content is also a strategy for brand owners to ensure their brand is portrayed in the most favorable light in the online market places. Brand Registry services give you the tools to control how your brand is represented online. In summary, “better product content drives more eCommerce”.
When I first saw the fact that Amazon listed over 100 million products, I questioned how that was possible. But, when distributors, who carry tens or hundreds of thousands of products use networked connectivity to have visibility to the millions of products available from their suppliers, then the sum of the physical inventory with the virtual (drop ship) inventory becomes almost limitless. Any wholesaler can present the same limitless assortment as the biggest online seller with powerful supply chain visibility tools. E-Commerce isn’t a matter of stocking more products. It’s a matter of knowing where the inventory is and being able to transact the order, seamlessly and automatically.
The third ingredient to a successful eCommerce strategy is ruthless efficiency in the processes that capture the order, put the product in the box and get it to the customer – all at the lowest possible cost. After all, why would any customer want to subsidize the inefficiency or wasteful practices of a higher-priced distributor? The low margins required to succeed in digital distribution aren’t unfair or punitive. They simply separate the best operators from the rest.
Fortunately, there’s a lot of excellent warehouse shipping management and fulfillment software solutions. Vending rules and logic that locate the product to ship from the most cost-effective location or drop ship vendor; bar code routines that ensure the right part goes in the box and gets the right shipping label; shipping box selection based on product weights and dimensions; along with rate shopping the popular carriers and shipping methods – these are just a few of the automated processes that can maximize the productivity of your shipping lane and ensure that the last few feet of your eCommerce process doesn’t rob you of the profits.
So, cheer up out there. If you have a network of stores and warehouses chocked full of desirable products and a network of suppliers to back you up on the long-tail items, I contend you ARE the supply chain to the Amazons and other marketplaces. There is nothing that prevents every “traditional” business from crafting a strategy to thrive in the age of digital distribution.
To learn more, check out the Marketplace Selling webinar series at www.gcommerceinc.com.