Amazon is one of the largest marketplaces that we as consumers have ever seen. With that, Amazon has primarily focused on a direct to consumer structure and caters more to end-user customers vs. the traditional B2B channel; that is, until a few years ago when the ecommerce titan really put some weight behind its B2B strategy– and boy has it made some waves.
In 2019, Amazon Business, the company’s B2B marketplace, saw gross sales increased 60% over the prior year, and surpassed $16 Billion in B2B marketplace sales in 2020, growing at a faster rate than Amazon Web Services, its cloud computing and network services arm. Finally, Amazon Business’ 2019 sales accounted for 5.7% of its entire 2020 revenue, up from 4.4% in 2018.
So, it’s clear to say that B2B businesses are adopting Amazon’s new marketplace idea at a rapid pace. But what’s behind this trend? Should this be something you consider for your B2B business? Should you look to sell your products on a marketplace such as Amazon or look to build your own version of a marketplace within your Commerce instance?
Let’s dive in.
Selling Your Products on Amazon or Other Marketplaces
By leveraging an infrastructure like Amazon’s, you’ll be able to extend your customer reach as these marketplaces have high customer awareness and retention.
If you have a unique product or unique price-point that no company can touch, you can own the space and won’t have to worry about competition.
“Cream Always Rises to the Top”
Amazon wants to sell more products, so if you build out your product content to be rich and customers are leaving positive reviews on your products, Amazon’s algorithm will bump your product up in search results to inspire other customers to purchase.
Not Your Customer
If you sell on Amazon, the consumers who purchase your products are not your customers, they’re Amazon’s. With that, Amazon has traditionally had strict rules on re-marketing to consumers who purchase through their platform, which presents challenges as you’d likely be able to make more margin if you sold directly to these customers.
You could potentially give the keys to the castle, so to speak, away with your products. Pricing, content, attributes, etc. will all be exposed for ANYONE to view – potentially giving your competitors visibility into your merchandising strategy.
If you’re a manufacturer selling direct on Amazon Business, your distributors may become a bit salty, as you’re essentially going direct and cutting out their business.
Unique B2B Needs
One of the main reasons to not sell on Amazon Business is that a lot of B2B organizations have unique needs when it comes to purchasing, and your catalog will be limited. Complex products that require long sales cycles and advanced configuration won’t work in this space.
So, I know what you’re going to ask. “Okay, that’s great information, but what should I do? I want to offer more products to more customers, but I don’t want to jeopardize my relationship with my current customers and create channel conflict”
Well, to answer that: You could create your own marketplace.
Yes, that’s right – I said it. Hear me out.
Essentially B2B distributors are marketplaces already. They offer thousands of products from various vendors through a digitally enabled commerce platform that enables customer self-service when purchasing products.
What you could do, however, is integrate with one of the various 3rd party marketplace software companies to extend your product mix outside of the current relationships that you have with your vendors. Here are some benefits to that:
- Extended product mix to serve your current customers
- Additional products to attract new customers that you may not serve today
- Increased revenue and customer lifetime value as you offer more for your customers in the channel they prefer to purchase through
At the end of the day, you’ll need to decide what approach to take based upon your unique business needs and challenges. What I will say is whatever you decide, always make sure to put your core customers’ best interests first, as they are the ones that keep the lights on. And if you still can’t decide what path to take, we at Perficient are here to help and provide guidance. Download our guide, Build Modern B2B Commerce Experiences With Marketplaces and contact our commerce experts for more information and assistance.