The Distributor’s Business Case for Selling on Amazon
Updated: Jan 24, 2022
When it comes to selling on Amazon Business, many distributors often scratch their heads, unsure if it’s a competitor to their business or a viable sales channel. Is it a threat or does it represent an evolution of a digital sales platform where a distributor should sell its products?
Analysts believe Amazon Business reached almost $30 billion in revenue in 2021. The marketplace’s breadth of assortment is enormous and they are selling products in a variety of very large categories—MRO, automotive, industrial, medical, office supply, and others.
While it is true some of the elements of Amazon’s business model compete with the traditional distribution approach, we believe that distributors are at a greater risk if they don’t sell on Amazon. Why? Well, contrary to the prevailing wisdom, we believe there are highly compelling reasons why distributors should consider selling on Amazon:
Amazon is a best-in-class ecommerce system.
Distributors can learn essential skills from Amazon based on how they deliver a B2B buying experience. And the best way to learn is by doing—i.e. selling on Amazon. By taking a smart approach, distributors can make Amazon a highly lucrative and viable selling channel. Here’s how.
First, it’s important for distributors to look for products or brands within their assortment where they have some sort of exclusivity or private label offerings. These products will help them stand out and differentiate themselves on Amazon. What’s more, products that they have an exclusive right to sell will allow them to maximize profit margins without putting themselves into channel conflict with the manufacturer (more on that below).
Second, it’s essential for distributors to leverage their knowledge of the B2B customer. No one understands the B2B buyer better than a distributor, who often works hand in hand with buyers to sell solutions to problems—not just products. Often times, that includes a very specific knowledge of an application or combination of products. Amazon allows distributors to present and market this knowledge through a variety of features offered by the Amazon Business platform.
The next step is key for distributors to develop an Amazon selling program for its suppliers. Many manufacturers are reticent to sell directly on Amazon due to channel conflict concerns and would prefer to provide rights to trusted resellers to sell on the marketplace, on the manufacturer’s behalf. Such a plan should include a promise to invest in the seller’s brand and to promote their products through Amazon’s marketing tools in exchange for having the exclusive or semi-exclusive right to sell their products there. It should also include a promise to respect and comply with the manufacturer’s MAP (minimum advertised price) and distribution policies.
This approach addresses a number of problems for manufacturers. For one, it helps prevent fly-by-night sellers from poorly representing manufacturers’ products on Amazon. Oftentimes, these sellers do not use brand-approved content nor do they respect the manufacturer’s MAP. And, most importantly, it allows manufacturers to have an Amazon presence using a trusted partner with whom they already have a relationship. They don’t have to do all the work of actually selling on Amazon themselves, which some manufacturers would prefer not to have to do. Using a distributor to sell products on Amazon ensures their products are represented on the world’s largest marketplace in a controlled and protected manner.
If you’re a distributor looking to develop a bullet-proof strategy for selling on Amazon, Enceiba can help. Reach out to our Managing Partner, Brian Beck, at email@example.com to discuss the best ways to conquer the platform. Because the truth is that there is much to learn and revenue to earn by selling on Amazon.