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:
- Downsize to your core profit customers (niches) and renew the relationships
- 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.
The Kodak veterans didn’t want to hurt traditional film sales, profits, dividends and stock appreciation rights. But, when disruptors start stealing your business, declining numbers are unavoidable. This is when it’s time to change or downsize and redirect your best talent into reinventing value for your most profitable core customers.
To win a share of digital channel growth against Amazon, you will need fresh intrapreneurial talent, not veterans! The next-gen digital buyers need digital sellers, not veteran field reps. You have knowledge and capabilities within your channel that Amazon Business does not yet have. So, let your digital intrapreneurs repurpose legacy strengths to sell both new customers, as well as old customers that want to buy in the new way.
Get Dual Strategy Analytics
To pursue both strategies efficiently, you need line item profit analytics (LIPA). LIPA lets you see net profitability rankings for customers, customer segments, sales territories, SKU’s, and vendors. Your biggest customers want uptime productivity from a replenishment system that has the lowest total procurement cost, so it’s time to turn you VPs of Purchasing into VPs of Supply Chain. Give them supply chain math solutions. Stop selling commodity products, service, relationships and prices. Tuned and customized replenishment systems are the most impervious to losing customers as they spot-buy items from digital marketplaces.
Analytics also helps you to reduce the cross-subsidies between the most popular profitable and unprofitable SKUs. Otherwise, Amazon and/or its resellers will undercut your current prices on the most profitable items.
Questions
- Do you have the analytics and leadership agenda to take core profit customers to the next level?
- Do you have the Intrapreneurs to perform the analytics and to create new digital business models?
- Would a free, virtual tutorial on how to reanalyze your business and guide your dual strategy help?
If yes, contact me at bruce@merrifield.com.