The Amazon threat and opportunity
Many of the executives of B2B industrial manufacturing companies with whom I speak think of Amazon as a convenient place to have their personal assistant source a book they're thinking of having their leadership team read.
That's a bit of an oversimplification...but not much.
Of course everyone is aware of the retail disruption that's occurring. Many lay blame on Amazon for the accelerating pace of bankruptcies. Yet many in the industrial manufacturing world fail to consider the wide range of implications to their corporate and B2B sales strategy.
The Amazon juggernaut is gradually changing:
- industrial distribution
- internet search
Here are some examples.
Automation and warehouse operations
Amazon is investing in equipment, facilities and technology.
- It recently became the largest shareholder in Plug Power - an industrial fuel cell company with technology to reduce charging times and energy cost to keep industrial trucks running in distribution centers
- In 2012 it paid nearly $1B for Kiva systems - buying the most advanced warehouse robotics company, and it's robust patent pool. This move not only has allowed Amazon to move quickly in innovative directions but has substantially locked others out of the market
- In Dec 2016 its drone delivery program became reality - with a bag of popcorn the seeming fantasy became reality
- There's speculation around the incorporation of Starship delivery robots (or an equivalent) for local deliveries where drones aren't feasible
- In the packaging capital equipment space where I have a number of clients, several companies are involved in development projects with large internet distribution players. Most seem aimed at creating proprietary solutions to vexing ecommerce fulfillment challenges that Scott Morris categorizes as the PMOT (physical moment of truth.)
It's moving to control the buyer relationships and the physical movement of products.
- Ecommerce has triggered a "real estate boom off the beaten path" in NJ - it began with a 2013 1MM ft sq warehouse investment by Amazon. The warehouses of course take the distribution model of major small parcel carriers in a different direction. Perhaps that's why Amazon is teaming closely with USPS rather than routing everything back through a Memphis or Louisville hub?
- Regional staging in warehouses smooths the transition to Amazon's patented "Anticipatory Shipping" - a distribution model that knows before you do what you'll need to order. Ponder that!
- Prime Air will be Amazon's own "air force" and is launching with an initial order for 40 aircraft - Time reports that's a small number compared to the FedEx and UPS fleets (643 and 237 aircraft respectively), but....
- Auto parts distributors like Autozone, Advance & O'Reilly Auto Parts recently learned how quickly their commercial world can change when Amazon announced it's entrance into that space - the natural question isn't whether your business will also be targeted....but in what order
- "Amazon is adding a trade counter to its UK website, selling equipment from staplers to centrifuges via a service designed to appeal to the corporate customers which account for about two-fifths of online spending" reported FT recently - it will include commercial grade power tools, and incorporate special discounts. This follows similar roll outs in the US & Germany
Online ads & SEO
If Amazon becomes the got to site to find things, then search changes.
- Amazon's ad program is growing - although it's focused primarily on profitable FMCG items like diapers for now
- Alexa is changing the nature of search - this is perhaps the most critical point for industrial manufacturers. With traditional search a typed query resulted in pages of listings. The challenge was to rank higher with organic results so that the searcher's selection of results was more likely to include yours. Then Google voice search (you probably use it on your mobile device) changed the input method from typing to voice recognition, but still provided a list of results from which you selected. A "featured snippet" might have been read back to you, but there was a list available. That completely changes when there is no visual interface - when you speak to Alexa you get an answer, NOT a list which you can peruse and select. Amazon now potentially controls the single answer....and they have a commercial interest in the outcome.
Implications to Corporate and B2B Sales Strategy
The short answer is "Who knows?" How could we possibly anticipate where all this will go?
That's true - but it's not an excuse for business negligence. Companies must consider implications to their sales channel model and their marketing approaches.
On the one hand it seems likely anti-trust regulators will limit Amazon at some point. On the other, it's not predatory practices that are vaulting it into it's uber-buying role - rather technology and convenience. It's easier and better for us as consumers - and increasingly as a business procurement option.
What kinds of planning make sense?
- If you sell through sales channel you need to very quickly evaluate the value of channel, refine your ideal channel partner profile and cultivate new relationships based on mutual value creation rather than a traditional transactional basis.
- Move very quickly to establish alternative business models in parallel. Incorporate sharing economy features (inclusive service rather than capital equipment sales - include data monitoring, technical service, alerts, reporting, continuous upgrades, suggestions for improving efficiency, etc.) that will establish your offering as far more than simply a product that can be listed and distributed.
- Stop reassuring yourselves that every machine is custom and every application is different. Sure, they are, but in consistent, predictable ways that will soon be engineered around.
- Orient your marketing around helping your customers improve their operations - forget pitching your products. That will at least establish your brand and expertise - and according to LinkedIn research often put your solution at the top of the list.
It's going to be scary
That's the reality. Get used to it.
You're stepping off into darkness with no clear path. You're going to have to suss it out as you go; and there will be painful mistakes.
But clearly, simply plugging along pushing machine data sheets out to your reps and distributors will fail.