Distributors Beware: Online Companies (Like Amazon) Are Changing the Rules

If you are a distribution company, I encourage you to read the article on CNBC.com, “Amazon juggernaut sets its sights on its next victim: The middleman”.

It describes how distributors are being squeezed by companies like Amazon because “sales in general are going to the internet”. It’s already affecting some B2B companies, like industrial distributors who sell products like screws, pumps, fasteners, and replacement parts.
Based on our experience in working with distribution companies, those that don’t face the realities of changing buyer behavior, and the very real threat of online companies like Amazon, will be forced to compete strictly on price.
With this looming threat, it’s critical for traditional distribution companies to differentiate. But how? That depends on each individual company’s situation, but a good place to start is by creating significant value during the buying process (the buyer’s journey), and continuing to provide exceptional value after the sale.

You Need a Comprehensive Online Strategy – Now!

This competitive reality requires a thorough re-evaluation of the entire business, including cost structures, customer service, salespeople skills, relationships with suppliers, logistics, etc.
But distributors must especially re-evaluate their online capabilities in order to meet the expectations of today’s decision makers.
Developing “back-slapping relationships” and handing out product catalogues will no longer cut it. Buyers want access to all the information they need to make good buying decisions, and then the ability to purchase products, online.
They also expect their suppliers to provide advice and insight after the sale by keeping them informed about new products, regulations, best practices, and more.
Some of the things you must absolutely do online to stave off this competitive threat are:

  • Optimize your online presence. Develop an e-commerce site, engage in database/email marketing, use social networking tools to communicate with your target audience, make resources readily available online (videos, technical specs, product comparisons, etc.).
  • Eliminate friction. Make sure all the information that prospects need to make an informed decision, including pricing, is readily available online. Don’t create friction during the decision-making process and give them a reason to go elsewhere to gather information.
  • Develop “strategic apps” designed specifically for your target market. These apps must create value for your target customers. Examples include online ordering, ROI calculators, product selectors, access to specifications/technical information, etc.
  • Provide your target market with educational content/subject matter expertise online that they deem valuable. Commit to ongoing development and distribution of content: industry trends, commenting on regulatory issues, creating case studies, new product releases, etc.
  • Engage with customers after the sale using online means. Your visibility with customers shouldn’t end with the sale – create ongoing value by keeping them informed.
  • Execute a consultative selling/lead nurturing model supported by online tools like CRM and marketing automation.
  • Have “world-class” customer service supported by technology that facilitates this goal.
  •  Engage in influencer marketing using online tools such as social networks to get others to spread the word about your business.

The Bottom Line

If you are a distributor, you can’t bury your head in the sand and ignore this very real competitive threat. According to Reuters, Amazon now has 300,000 registered corporate buyers, and recently surpassed $1 billion in B2B sales. They are only going to get bigger and more aggressive.
It’s not all doom and gloom. The internet offers distributors an opportunity to extend their market reach, lower their costs, and create significant value during the buyer’s journey. There are no barriers with respect to technology; online tools are no longer cost-prohibitive, and are available to companies of all sizes.
Your advantage is your intimate knowledge of your market, your relationship with existing customers, your reputation/goodwill, and your relationships with manufacturers.
But you need to take action. Companies like Amazon aren’t going away.

Core Online Marketing is an outsourced online marketing agency for small and mid-sized businesses. Contact us to accelerate your online marketing activities!
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Ben Molfetta
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