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.
Because AMZ has intersecting, reinforcing platforms, all innovation at Amazon Web Services indirectly boosts B2C and B2B customer value. And this increase is often exponential due to chip and bandwidth power. Here are just a few examples:
- Alexa developers will use increasing cognitive-computing speed, tools, and algorithms to vastly improve voice commerce by 2019
- Automated replenishment solutions via the Internet of Things (IoT) applications will improve
- Product information and education video quality continues to soar and customers continue to receive just-in-time “pull” educational experiences, which will force the “push” model reps use for product pitches to change
- Bot-controlled inventory management is increasing the flow of inventory from Asian factories to our doorsteps with better fill rates, making it likely that a distributor can’t match AMZ reseller variety, pricing, and effective fill-rates on the most profitable warehouse SKUs
Who will love this?
Old-school customers? Maybe. Millennials? Yes! A recent comScore survey of 18-34-year olds discovered that the AMZ phone app was their #1 most essential app. As these digital natives join the workforce, they double-check their supply needs at AMZ and they often find better solutions there than from their employer’s rigid contract supply programs. Complaints to the purchasing department then prompt complementary deals with AMZ-BIZ, and first year spend can quickly approach 20% of the total.
And when Millennials become the buyers, other surveys reveal that they see both outside and inside reps as an inconvenience when doing quick 24/7 rebuys of commodities. You should be asking yourself:
- How fast will channel rep value for commodity rebuys fall?
- What is your 2019 rep vision and transition plan?
AMZ owns your next-gen customers. What are your innovative ideas for minimizing sales losses to AMZ? Are you considering partnering with this frenemy? How will you out-innovate their value and within what customer niches?
For ideas and answers, attend the Advanced Profit Innovation Conference in Toronto on October 26th. For more info: www.apicconference.ca