Amazon Business is Driving B2B Digital Transformation
In a recent blog post, Amazon Business reported $10B+ in annualized revenue. That number is staggering. Not only does it reflect the general trend toward ecommerce, but particularly the trend toward B2B ecommerce. That’s $10B in B2B transactions on Amazon.
Clearly, the growth of Amazon Business has vast implications for manufacturers, particularly those who sell commoditized products. Yet even those manufacturers without commoditized products are beginning to experience the pressure to move to ecommerce. Simply put, it’s where the world is going.
So what does Amazon’s $10B+ in B2B revenue mean for manufacturers? We’ll explore this question in terms of the two main ecommerce options facing manufacturers: privately owned ecommerce (what Corevist supplies), and Amazon.
First off, a revenue comparison between the two:
Amazon Business is only 10x all Corevist client revenue
Let this sink in for a moment:
- Amazon Business processes $10B+ in annual revenue.
- Corevist processes nearly $1B in annual client revenue.
As a block, our clients represent a market 1/10 the size of Amazon Business. Clearly, there’s B2B revenue waiting to be captured with a private web shop (i.e. your own ecommerce store, as opposed to Amazon.com). And there’s plenty of revenue to be captured through Amazon, too.
Here’s what that means: Manufacturers without a digital strategy need to get one—fast.
Sitting on the sidelines is no longer enough
Though B2B ecommerce technology has reached the point of maturity, many manufacturers have stayed out of the game. The complexities of B2B make it doubtful whether vendors have really mapped their technologies to the needs of B2B.
However, manufacturers can’t stay off the ecommerce bandwagon forever. As more and more B2B transactions become digitized, expectation grows among B2B buyers. Manufacturers need to act.
Why manufacturers are wary of B2B ecommerce
For manufacturers that have been around awhile, this development may have a familiar ring. At the dawn of the dotcom era, when these digital marketplaces were proliferating, they popped up in every vertical and horizontal. At the time, Amazon was just an instance of that trend. (Remember, they got their start selling books!)
In light of this sudden explosion of digital marketplaces, manufacturers worried about their strategy. Being disintermediated is the worst thing in the world for a manufacturer, and everyone was afraid that would happen to them. The question at the time was, “How should we, as a manufacturer, respond to this new Wild West of ecommerce? Should we build our own marketplaces? Join consortium marketplaces?”
Different manufacturers tried different marketplaces, each one a risk of some sort. The smart manufacturers realized they needed to invest in their own direct-to-customer efforts. They couldn’t abdicate getting their own digital platform and skills. Though they were scared, many manufacturers dived into ecommerce.
Of course, there was good reason to be scared.
Manufacturers must stay true to their identities…
The dotcom crash in the early 2000s taught us all a hard lesson: manufacturers are manufacturers. Simply put, you can’t sell stuff until it gets manufactured! You have an advantage as a manufacturer. You supply the raison d’etre for digital B2B marketplaces. Without your product, there’s nothing to sell.
After the dotcom crash, the market has slowly grown for B2B digital platforms. Now, having passed $10B in B2B revenue, Amazon Business serves as a sign of the times. B2B transactions are happening online.
…yet every manufacturer must define a digital strategy (with or without Amazon)
Every B2B manufacturer is in a unique market situation, but they all have one thing in common: Every manufacturer must develop a digital strategy—even those that got burned in the dotcom marketplace bust. That digital strategy must take the rise of Amazon Business into account. The question is not “Should we do ecommerce,” but rather, “how should we do ecommerce—Amazon Business, our own web store, or both?”
The answer to that question depends on many factors:
- How commoditized are your products?
- Do you want total brand control?
- Do you want to gather customer data for marketing purposes?
We’ve addressed these questions in detail elsewhere on our blog. However, to summarize, many manufacturers will find that diversifying their digital channels gives them the best balance of coverage and control.
What does that look like? It means using Amazon to your advantage, but also not abdicating entirely to Amazon.
If you can’t beat Amazon, join them…
This isn’t an either/or question. Amazon offers great benefits, and a manufacturer-owned web store offers its own set of benefits. In fact, the two often work best together.
Amazon will get you to certain consumers and markets to build up your brand. (Of course, with that comes the need to do some brand management.) But the best thing is to give Amazon your commodity products. Innovate in terms of some of the features and applications of your product, and get it up on Amazon. From a content standpoint, you want to be easier to do business with and do rich content. Amazon won’t create that for you. That’s your job as a manufacturer.
…but don’t abandon your distribution channel!
Because your whole business is running on SAP, you can still maintain your existing distribution channel and add your own ecommerce store as another channel. The answer is not, “This channel or that channel,” but rather, “all channels.”
The good news is, you don’t need multiple platforms to do that. You can sell through Amazon and through a Corevist Commerce store at the same time. (Trust us—it’s happening right now in the real world.)
It’s helpful to draw a picture of the manufacturer and all the various ways they can go direct to the consumer. Amazon is a distributor—a hosted distributor, not necessarily the entity selling the product. Your relationship with Amazon depends on what you want to pay Amazon and what services you want in return. It could be as simple as your own Amazon web presence with you, the manufacturer, fulfilling orders. In this scenario, Amazon doesn’t own your inventory, they’re just the channel.
Whatever your relationship with Amazon, you have to ask yourself: Will Amazon get to 100% of your end customers?
The takeaway: Define your digital channel(s)
The moral of the story is, every manufacturer is constantly trying to optimize their distribution strategy. The options for how to execute on that strategy are getting more and more serious. With $10B in Business revenue, Amazon has raised the stakes in that game. Now everyone has to evaluate. Compete with Amazon? Partner with them? Abdicate to them? Whatever it is, you have to make a decision, and we’re happy to have those conversations with you.
Moving forward: FREE case study
Wondering how real manufacturers are responding to ecommerce consumerization? Download this FREE case study on Mannington Mills. You’ll learn how this leading manufacturer of flooring added rich content and a B2C-style catalog to their private ordering portal and saw a 150% increase in digital sales.
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