Amazon: friend or foe of the manufacturers?

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Manufacturers have a tradition that often spans decades or even centuries: selling products face to face, door to door, phone call to phone call. Then, all of a sudden, they are faced with a daunting task: enter a new galaxy called the world wide web and compete with old and new competitors, or go extinct. And yet, according to respondents, 65% claim to see Amazon, Alibaba and other online marketplaces as an opportunity.

As Nick Powers, eCommerce Concept Owner for a large Finnish manufacturer explains, online marketplaces are “certainly not a threat, you can maintain a positive brand experience through marketplace channels. In fact, B2B’s should be operating their own marketplace platform, too, through this, you can avoid channel conflicts and allow customers to have an optimal experience based on product and time-to-availability. Distributors and brands owned by the group will also be happy, they can sell your products through a single marketplace without conflict since you can maintain and control visibility to products (i.e based on brand or country for example) on a customer-centric level.

Brian Beck goes further: “B2B firms are realizing that marketplaces such as Amazon and Alibaba are viable selling channels. More than 64% of respondents consider these selling platforms as an opportunity to grow revenue. For companies that differentiate based on the strength of their products (such as branded manufacturers), this is a clear vote of confidence in the efficacy of marketplaces and represents a shift in selling channels versus a competitive threat. This survey demonstrates that B2B e-commerce is here, in force, and the companies that are taking advantage of it are creating competitive differentiation, and are winning by meeting their customers’ expectations.”

Amazon and other online e-commerce platforms have set the bar of what a customer-centric platform should look like, very high. In fact, most manufacturers are seeking to replicate this “amazon experience” for their own customers. As seen in our previous chapters though, choosing the right strategy and execution is challenging.

The takeaway

The true challenge of online marketplaces really lies on the loss of control: control on price, control on data, control on branding. Amazon is the number one online source of product search in the world. It would be unfathomable not to have some kind of presence there if your (potential) customers are using the platform to search products and your competitors are listing their products on it. And how do you protect your brand if resellers or pirate companies are selling your products through the online marketplace? In many conversations I’ve with leaders within manufacturing organizations, there is a high self-assurance that their business is ready to weather the oncoming tech storm because, as commoditized as “products” might become, their “knowledge” will always remain as a key differentiator. But as we’ve seen in the past, the knowledge of movie enthusiasts working for Blockbuster and recommending movies with a smiling face did not deter the rise of NetFlix, who simply replaced that “knowledge” with AI-based product recommendations. Worryingly, only 18% of manufacturers that currently have an online sales presence actually have moved to a one-stop-shop experience for their customers. Yet, moving towards a pure marketplace solution will be the only way B2B companies will remain truly competitive in the long run. The time to act is now.

Check out our new business platform for e-commerce, e-Connect Europe if you are interested to learn more about B2B e-commerce.