Strategic Insights 34

AmazonSupply (AS): New Competitor and Role Model

The news on AmazonSupply.com (AS) will continue to accelerate. AS has recently increased its items for sale into 17 (and climbing?) “vertical” distribution channels in pursuit of “business-to-business” (B2B) sales. On May 8, 2014 Forbes Magazine published an article:  “Amazon’s Wholesale Slaughter”, which was long on short-term hype, but short on long-term vision.

Because Amazon (AMZ) is the most: innovative and channel-changing juggernaut ever, what we see today at AS is just a beginning. Their mission statement suggests more to come: “to sell everything needed to rebuild civilization”. How will AS pressure your 100-year-old channel’s service-model and rules? What other right, best questions about AS have you written down to think about? 

IMPROVE ON AND ADD TO THESE QUESTIONS:

·        How fast and in what ways might AS poach, which specific-types of customers and products, from your channel and company?

·        Will AS target your most-profitable items with Every-Day-Low-Prices (EDLP) as AMZ has done in every retail category they’ve entered?

·        If profits and sales are lost on best items, how will you subsidize your super-losing SKUs?

§  What are your top-100, most-net-profitable and un-profitable items? Why are they that way? What should you do with these answers if you get them?  

§  AMZ sells popular, small-dollar items, but: bundled; as add-on-only items; and/or at higher prices. And, we still buy them! Why can’t you do that with popular, small-dollar-per-pick items that have less margin dollars than your dollar-cost for the line item pick? 

·        AS has the supply-chain math to know their cost and net-profit on every: line item, order and active customer. You should too! Why? How? Then what new plays are possible?

·        As you assess AS, what are your analytical blind spots? Are you:

§  Over-focusing on what AS can’t currently do to minimize their threat? You won’t be the first! The business press has dismissed AMZ repeatedly. In May ’97, the media proclaimed “Amazon. Toast” when mighty, Barnes and Noble opened their online bookstore. In May ’99, Barron’s declared: “Amazon. Bomb”; etc. Don’t under-rate AS’s longer-term possibilities!  

§  AMZ’s core competency is empowering end-users by taking cost (people) and time out of the ordering process with perfect service on “everything”. To empower the customer, they must break existing channel rules that are supplier/product-push and sales-rep centric. The biggest-clout players in the existing-order have the most to lose. Who wants to see or believe that they and their rules are losing value?

§  Will reacting to a new competitor distract you from being like AS and reinventing your own, next-level, value-solutions for your best target customers?

·        Is breakthrough service-value reinvention for best accounts possible? Yes! Check out the 9 minute video below. A CEO explains how his one-location, $8MM distributorship used customer-centric insights from Line-Item Profit Analytics to pioneer a “customer intimacy” supply-chain re-tuning effort. They doubled sales and increased profits more than 400% in 24 months with their top accounts with solutions AS can’t match! Here’s the link: http://www.apicconference.com/APIC_videosBM.asp

STAYING ON TOP OF THIS UNPREDICTABLE FOE?

1.     The distribution trade press has been watching AS for two years. Google “amazonsupply” + either “Modern Distribution Management” or “Industrial Distribution”. Their ongoing coverage of the facts will appear. 

2.     Go to Google News and search for both: Amazon.com and AmazonSupply.com. Sign for news alerts on these names.

3.     Randy Maclean has done both a short write up and video clip on AS. He has identified 5 capabilities of AS against which you should benchmark your service capabilities.

a.     The link? http://randymaclean.guru/latest-news-and-updates/

b.     Randy’s comments ONLY HINT at what AMZ knows about supply-chain-math profitability and most distributors don’t. For his full, live-coverage on AMZ/AS AND how to get and use supply-chain math, grab one of his few, no-fee, fall-speaking slots for your distributor-group meeting.

4.     Randy and I did a 20-minute video interview about AS and AMZ strategies. At my normal, 417-word-per-minute clip, I touch on how:

a.     AMZ has pioneered different pricing and service-models for different segments of the SKUs: (1) popular profitable items; (2) popular, small-dollar items; and (3) “long-tail”, dust-collectors which are “Fulfilled by Amazon (FBA)”.

b.     And, how distributors can do their own, next-level, supply-chain-math solutions for best customers. (Link to our video interview:    https://www.youtube.com/watch?v=GogwbWRzh6Q)    

5.     Attend the Advanced Profit Innovation Conference on October 1-2, 2014 in Phoenix. There will be a big-gun panel on AS. Plus, the why and how for using net-profit analytics will permeate all of the sessions. (apicconference.com)

6.     Check out my deeper-dive exhibit on: “AMZ’s Extending Platform Potential, and What-If Scenarios for AS”. See Exhibit 65 at the following link:  http://www.merrifield.com/exhibits/Ex65.asp.

CONCLUSIONS

AMZ is threatening EVERY physical (and digital) product-channel player from Walmart down. Players with biggest, old-rules assets will get hit hardest. Niche producers and dealers, conversely, love AMZ for leveling the marketing, distribution advantages of the Bigs with: “Marketplace + Prime + Fulfillment by Amazon”. Start living the right questions to: defend intelligently against AS and innovate like they do!  

 

 

 

Strategic Insights 34, Merrifield Consulting Group, LLC is related to Exhibit 65 at: <  http://www.merrifield.com/exhibits/Ex_65.asp.