Amazon Business is the internet retailing giant’s most recent foray into the world of B2B. Launched in the UK in April this year, will Amazon Business build your business or break your brand?
A £100 Billion B2B Marketplace
The new service, targeting the UK’s £100bn+ B2B ecommerce market, is Amazon’s latest departure from its consumer retail model and provides businesses with the platform to sell everything from office supplies to industrial tools, to safety equipment.
With more than 100 million products, targeted at all sizes of company, Amazon Business positions itself as a competitive marketplace with low cost goods, free one-day delivery and VAT-exclusive pricing.
Is Amazon Business Right for You?
If you’re thinking about using Amazon Business as a way to reach your B2B audiences, there are a few considerations that you need to weigh up before you decide whether it’s right for you.
On the up-side, a lot of people are buying from Amazon Business already, so you have a ready-made audience of B2B buyers. However, you still need to cut through all the noise. Although there are a lot of potential customers using the services, there is a lot of competition.
Amazon can also fulfil your orders for you, taking the pain out of the distribution process. All you do is ship your products directly to an Amazon warehouse and they take it from there. They also handle many aspects of customer service, refunds and returns. In addition, the marketplace can provide you with a range of tools to improve your customers’ experience, including quantity discounts and preferred customer pricing.
The High Price of Business
However, all of the above can come at a price to your business.
To begin with, the fees can eat into your profit margin, coming in at 15%, based on the examples that we plugged into Amazon Business. If you decide to use the Fulfilment by Amazon service, this will incur additional fees on top of the 15%.
Although erosion of your profit margins can be highly detrimental to your business, brand erosion can have an even greater effect. When using Amazon Business, one of the main hindrances for a company wanting to make an impression is the lack of brand identity. Buyers will see Amazon as their product provider, with limited communication available between the seller and the customer. This even includes regulations around what can be included in a business’s shipping packages. As a result, it can be difficult to build a brand and develop a mechanism for repeat business. As far as Amazon is concerned, the buyers are customers of Amazon and not of the individual businesses operating within their framework.
Moving on one step from there, Amazon Business leads with the statement “Competitive Low Pricing”, positioning products on its platform as little more than commodities. If your company’s long-term strategies for sustainable competitive advantage don’t fit well with low-cost or price war models, Amazon Business may not be the first option for you to consider. Companies that compete on differentiation, customer service, quality, purchase advice or bespoke products are likely best served elsewhere.
If you’re happy to sell based largely on price and aren’t too worried about building customer relationships, then Amazon Business could be a solution for you to consider. Using Amazon Business can increase the visibility of your products, though with more than 100 million products available, in terms of pricing, it could very quickly become a race to the bottom.
There is no substitute for having your own ecommerce presence, which can add value for a customer in many ways that Amazon Business just cannot achieve. If you are still considering using Amazon Business, one way of using it effectively would be to offer a portion of your products for sale there, and direct traffic to your website for further sales and to entrench customers into your own online presence.
If your company is beyond the start-up stage and selling differentiated products, your strategy needs to extend beyond Amazon Business. Developing your own ecommerce presence will allow you to build your brand values, connect deeply with your customers and focus on repeat business.
What’s Your Experience?
Are you using Amazon Business or considering taking the plunge? What has your experience been like? We’d love to hear from you.