Just as the distribution industry is reaching a tipping point where most companies can sell online, it looks like having a company-specific website isn’t good enough anymore – no matter how good it is. You also need a marketplace strategy.
Marketplaces offer enormous product range from many suppliers while allowing customers to process transactions in one place. In B2B, Amazon Business is growing at a ferocious rate, with close to 350 million active SKUs, and some analysts think that Amazon Business is going to hit more than $200 billion in gross merchandise revenue by 2029. Amazon is the most obvious example of marketplaces that carry B2B SKUs, but you can find them on Google Shopping, Walmart.com, Alibaba, eBay Business & Industrial, Zoro and other websites, too.
These are some of the largest, most well-capitalized, aggressive and sophisticated companies in the world — and they’re coming after distributors’ customers.
We’re not predicting that distributors are going to go out of business as a result, but these new rivals are going to take major market share. In our recent episode of Wholesale Change, we discussed why distributors need a marketplace strategy now to stay competitive.
How distributors can compete with marketplaces
With this encroachment into their back yards, distributors must figure out how to compete. Here are three ways to do that:
You must go digital. Distributors need a world-class digital presence, period. Make sure your ERP and CMS are connected and offer customers robust product data and accurate pricing. The entire technology stack must operate seamlessly and offer the same value proposition as other channels. After all, if customers figure out that buying online is a really expensive way to buy from you, they’re not going to do it — and may seek out your competitors instead.
Produce an outstanding services menu. Consider the value you can add as a distributor outside the items you sell. The marketplace financial model relies on excluding people from contributing to the value delivery process; they want to leverage a fixed-cost base as their sales go up. So, consider how you can set your company apart with a services strategy. This can help you hang onto merchandise sales, because you’re involved in customers’ purchasing processes and an essential part of their operations.
Build a marketplace strategy. You must have a marketplace strategy, even if your marketplace strategy is “we’re not going to do anything until 2023,” or “we’re just going to do long-tail,” or “we’re going to run a couple of experiments to see how this works.” You can’t not respond to what’s going on with marketplaces today. Take some time to consider how you want to respond, then form a plan and execute it.
Marketplaces in 2020 are Like eCommerce in 1995
If you formulated a business strategy as a distributor in 1995 and failed to take into account ecommerce…well, it would have been a lousy strategy. Today, marketplaces are bringing a tidal wave of change to wholesale distribution. Don’t make the mistake of ignoring them as you lead your firm into the future.