Category Archives: AmazonBusiness

78. A Dual Strategy Against Amazon’s Digital Channel Disruption

Amazon’s digital channel has eclipsed much of the information value and cost efficiencies once enjoyed by traditional distributors. When a disruptor eats into your space, you need a dual response strategy:

  1. Downsize to your core profit customers (niches) and renew the relationships
  2. Use your incumbent capabilities to create a new business model to join the disruption growth party

Don’t Be Kodak   

Back in the day, Kodak had a massive camera film franchise. They also invented the first digital camera. But, they let the technology languish. As others began to chomp into their film sales, Kodak put film veterans in charge of a catch-up digital-camera strategy. The strategy was to get digital photographers to print out their best photos in order to stimulate film sales. Mighty Kodak collapsed. Continue reading 78. A Dual Strategy Against Amazon’s Digital Channel Disruption

77. How Amazon Will Skim Your Cream SKUs

At the upcoming Advanced Profit Innovation Conference, I will delve into what Amazon (AMZ) is doing and why you should be paying attention. I’ll present a case, based on real data, showing detailed facts about six of the most profitable, and the most unprofitable, items from a contractor-supply distributor’s total of 5000 active warehouse items.

The Profitable SKU Facts

The case distributor uses line item profit analytics to calculate a profit or loss on every SKU. For 2016, the average stats for the six most profitable SKUs were:

  • On average, 150 customers bought these items 750 times per year or five picks per customer
  • The average sales per pick for all six was over $1100
  • The average margin rate (22%) generated an average margin dollar per pick of $250
  • The average cost-to-serve dollars per pick ranged between $82-88
  • The profit equation:  $250 – 85 = $165 (less another $62 for rep pay)

Continue reading 77. How Amazon Will Skim Your Cream SKUs

76. Amazon Begs Your Innovative Response

Recently, Wall Street investors ignored Amazon’s (AMZ) latest lower earnings report and bid for $49B in new bonds. AMZ nibbled only $16B (at lower than projected interest rates) and bought Whole Foods for $13.7B. What will they do with the extra $2.3B? It is likely they’ll add to their already huge innovation budget. In 2016, AMZ spent $6.74B on fixed assets, with overall estimates for “innovative activities” exceeding $17B.

How does AMZ’s investment in innovation increase value for B2B buyers? 

Following the news feed for AMZ’s daily innovation announcements is a full-time job. Most of these innovations indirectly increase value for Prime customers, while also bringing in new Prime customers and increasing retention. Then, there is a domino effect as these Primers take their AMZ shopping expectations to work, causing an accelerating increase in B2B sales.

Continue reading 76. Amazon Begs Your Innovative Response

74. Millennials Want Their Corporate Amazon, So Does Big Government

Recent data shows that 23% of consumers are digitally-obsessed buyers, and this number just keeps on growing. Even at work, millennials immediately compare their internal buying system to Amazon’s (AMZ) offerings. What are they finding? Some pretty important features including more choices, more product information, faster ordering, faster fulfillment, and increasingly often, lower prices.

Some corporate procurement departments have taken notice and set up a contract with AMZ-BIZ to complement their existing supply contracts. What are the results?
Continue reading 74. Millennials Want Their Corporate Amazon, So Does Big Government

73. Do You Have a Living Channel Strategy?

Legacy channel executives will want to pick up a copy of The Living Supply Chain, by Robert B. Handfield and Tom Linton. I recently reviewed and recommended it on Amazon. The authors make the case that a convergence of maturing technologies is enabling supply chains to become LIVING, their acronym for what they see as the new key supply chain components: Live, Intelligent, Velocity, Interactive, Networked, and Good. The authors focus more on inbound global supply chains to factories, but you can sample their observations just by shopping through Amazon.

Amazon already gives you interactive, mobile, bottom-up information

Amazon is consistently number one in ratings for online shopping experience. A big benefit is their bottom-up, crowd-sourced reviews, ratings of the reviews, FAQs, photos, and ever-growing library of product-related videos.

Continue reading 73. Do You Have a Living Channel Strategy?

72. Amazon Prime Day Holds Clues to Your B2B Future

Amazon (AMZ) keeps its strategic information well under wraps, but it’s obvious that the company is building an innovative supply chain that begins not with the product but with the customer. AMZ is designing backwards, from customer to factory, and they’re doing it on a global scale. AMZ has thrown out the century-old factory model that depends on a rep-intensive, product push channel. Each link in this new chain instead relies on a digitally and/or robotically scalable platform that is used by increasing numbers of buyers and sellers.

With AMZ’s digital, customer-centric vision in mind, let’s take a deeper look at their recent Prime Day (PD) stats. Amazon Prime Day was July 11, 2017 and here are some interesting B2B tidbits.

Sales up 60% and testing the system

PD serves multiple objectives. One is to stress test delivery from Asia to the U.S. before the Christmas rush. The bottlenecks uncovered during last year’s PD sparked the leasing of cargo planes, trailers and containers to reduce shortages, delays, and surge-shipping prices. My prediction is that AMZ will win an even bigger share of this Christmas’s sales. The question is, what B2B (AMZ private label) goods will start flowing through this seamless channel in the future? 

New Prime members

Over 50% of the wealthiest, highest-spending households in the U.S. are now Prime members and over 50% (and climbing) of all product searches start at Amazon. In addition, Millennials, who are aging into B2B purchasing jobs, are taking their 100% digital buying habits to the office. And, AMZ has locked in an increasing number of future B2B buyer eyeballs with intense, ever-increasing, crowd-sourced product information, reviews, product FAQs, photos, and more. If you sell a physical (B2B) product, can you not be on Amazon? 

Fulfillment by AMZ can’t be ignored

Competitors tried to counter PD with their own deals. Their weak-by-contrast performance boosted AMZ experience and fulfillment brands. AMZ sold 6000 items a minute across 13 countries with real-time fulfillment tracking and on-time delivery. Won’t more B2C and B2B resellers want to piggyback on Prime’s reach, AMZ’s best website experience, and fulfillment by Amazon (FBA)? What are the performance trends for FBA? Prime Now distribution centers are on the edges of over forty of the biggest North American metro markets. With more throughput, both target delivery times (30 minutes) and costs will drop. The number they are keying on is deliveries per hour to an ever-smaller city zone. UPS averages one stop per mile driven. What if AMZ gets to .25 miles per stop using AMZ Flex (gig) drivers? Won’t an increasing number of urgent B2B orders go to FBA v. legacy distributor capabilities?   

Learning the hottest items 

Clearly, Echo and Dot with Alexa on board are toys for the home now, but what about B2B “voice commerce” in two years? Surveys reveal that Millennials can’t wait for voice ordering. Look for ever-improving releases of Alexa, Dot, Echo, and the Dash button on many buyers’ phones, desks, and in supply closets in 2019. Automatic reordering of B2B staples will grow!

Deny and minimize the AMZ B2B threat, or learn and act! 

B2B distributors won’t disappear completely, but profits and the number of firms will fade. What are your counter plans? For more on these ideas, catch my presentations at both fall Advanced Profit Innovation Conferences. Investigate and register:

Phoenix: October 16-17th (apicconference.com)
Toronto: October 26th (apicconference.ca)