February 15, 2017
Ecommerce has dramatically effected retailing forever and, in time, may overtake brick and mortar. It’s easy to imagine such a shift as ecommerce continues to grow at double-digits while traditional retailers do their best to hold on. Even categories not normally associated with etailing show promise. Carvana lets you buy a car online! They deliver on a flatbed, you test drive, you buy or return it for a different car. Mattresses can be bought online. Couches, refrigerators, frozen foods - you name it. Even groceries are moving toward ecommerce with 29% of U.K. grocery sales coming online! In the U.S., online grocery sales is expected to exceed $18 Billion by 2020.
These behaviors have transformed the office category as well. Staples relies heavily on ecommerce with over 50% of its revenue coming online (source: emarketer). Amazon just reported 2016 revenues of $136 Billion, of which Amazon Business contributed heartily. As more B2B players market online, Amazon will continue to take share from etailers and retailers with its powerful brand presence, support, and pricing model. Like it or not, Amazon is a hungry lion that can eat at your margins, prices, and customers.
But there are ways to tame the beast.
First. Understand what Amazon does well and clearly define where and how it can help you. Same for the other etailers (Wayfair, Hayneedle, Staples, Tesco, John Lewis, etc.). Many of our partners find value in Amazon’s fast-turn, free delivery capabilities. Others leverage its easy-to-use storefront option on the world’s best-known etailer. That said, Amazon is not a cure-all. Make sure you understand why you need Amazon -- and why you don’t.
Second. Consider white-labeling products you feature on Amazon, and other ecommerce sites, with different pricing strategies. Amazon charges upward of 20%, which undermines the investment made in your brand. White-labeling allows you to leverage multiple etailers while maintaining strong branding and higher margins on your own site. Remember, Amazon is a price follower, not a leader. Margin erosion can be avoided with effective pricing strategies for each online reseller.
Third. Social media can make all the difference. Depending on your brand and product line, platforms such as Pinterest, Facebook and Twitter are fantastic ways to extend online marketing efforts.
Fourth. Amazon is no longer the only mega-player. WalMart’s acquisition of Jet creates an interesting opportunity as it charges lighter fees (stronger margins for you) and does not require an annual fee (ala ‘Prime’) to get free two-day shipping. Plus, you can usually get same-day pick-up at your nearest WalMart. FedEx is also taking on Amazon, recently announcing plans to warehouse and distribute online purchases for small to medium-sized manufacturers. More and more, strong alternatives to Amazon are appearing across the globe.
These are very disruptive times, exciting times. Those willing to take a smart, strategic, clear-eyed jump online will be rewarded. But jump in with an informed, committed strategy or risk getting eaten alive.
SVP New Business Development