69. The Many Faces of Amazon

Amazon (AMZ) is continually pushing the boundaries of innovation in distribution. Following their ever-evolving methods for consuming channel volume is a full-time job. Depending on your perspective, AMZ has become your friend, your foe, maybe even your partner. However, one thing is for sure across the board: Amazon should be your role model for innovation in distribution.

My presentation at the Advanced Profit Innovation Conferences coming up this fall take a deep dive and explain why I say this. Here are the dates:

The live discussion will take a look at AMZ’s latest moves in the marketplace. I will attempt to answer and analyze what I think are the most important questions so we can all learn from the master.

Here are a Few Questions for the Discussion:

How big and fast will AMZ-BIZ grow? With $4B for 2016 and a projected $10B in 2017, are these rates sustainable? Why or why not?

Why are AMZ’s powerful, compounded platform capabilities underestimated by so many legacy-channel players?

AMZ is currently stealing re-orders for commodity goods that fit through its Prime Now warehouses. Will they add automated, warehouse capacity for big, bulk-buy scenarios?

AMZ seems to be turning more friendly towards B2B marketplace resellers? Why? (I have four reasons so far.) Will they partner with B2B resellers for converting activities within bulk warehouses, perhaps adjacent to Prime warehouses?

Why are your most profitable customers, those with the lowest cost-to-serve, reordering your most net-profitable SKUs from AMZ instead?  Easy! Why buy these warehouse commodities from you when AMZ offers fast, 24/7 order-entry, faster delivery, and lower prices? And, they don’t need any help on these buys from you!

To meet this challenge, you need data. Do you know your most profitable and unprofitable warehouse SKUs? How will you fix those cross-subsidies before more of your profit gets poached? Why wouldn’t a reseller offer the most popular (top 2%–5%) SKUs at low prices for just one Prime warehouse in your metro market?

AMZ as a Role Model

For the time being, your customers will remain loyal to you for services and capabilities that AMZ currently doesn’t provide. But, what happens to your bottom line if you lose your best orders while getting cherry-picked for more expensive capabilities?

Faced with these challenges, how will your sales force compensation plan weather the loss of the most-profitable warehouse volume? Will your standard service/selling bundle start to unravel? If so, what will your new service models be?

If AMZ can be obsessively customer-centric to reinvent value from a target customer backwards, why aren’t you doing the same? Pick some initial customers (or a niche) and get going. This is innovation in distribution.

Meeting AMZ in the market, using their own tactics as a model, is one way to keep your business ahead. For specific answers to some of these questions, and to fight back effectively you need line item customer profitability analytics. Line item profitability analytics is the basis of a solid plan for keeping your best customers. Learn more at APIC, and in the meantime, send more questions to: bruce@merrifield.com. Hope to see you there!

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