We have done a great deal of work in the last year assisting B2B manufacturers and distributors develop or refine their marketing strategy for online marketplaces, particular when it comes to Amazon and eBay. Anyone who has been following the growing important of such online marketplaces in the B2B space knows that their growth has been significant in the last five years and that grow shows no signs of letting up. In addition, in the absence of a clear and defined strategy for marketplace selling, brand managers often find, much to their chagrin, that a selling “free for all” has erupted on the marketplaces with subsequent negative brand impacts. Hence, increasingly, we find that manufacturers, who historically have not sold direct, are stepping in to control and optimize their brand presence on these marketplaces.
While there is no “one size fits all” strategy solution to selling on marketplaces like Amazon.com, AmazonSupply.com and eBay.com, there are several key issues or considerations that each manufacturer must come to grips with.
- Having a marketplace presence is increasingly important. More people who have the intention to buy something search on Amazon than Google. Also, Amazon dominants the world of organic search. eBay is not far behind. As such, manufacturers are increasingly thinking that you must be present to be seen, even if you don’t sell much on any particular marketplace. Of course, most sellers want the exposure and incremental sales. Step one is to know your market and competition on the marketplace and how it’s evolving. Study your competitors, your distributors, comparative offers/pricing and begin to formulate your strategy and plan of attack.
- Know your objective. A B2B distributor usually starts off thinking that selling on a market place will be a source of incremental sales, maybe even new international sales. A manufacturer may have the objective of managing their brand, channel conflicts and pricing. As research progresses, it becomes apparent there are many reasons why it may, or may not, be optimal to sell certain products or all products on one or more marketplaces. Knowing your objective and refining your strategy is key before you start any course of action. Remember, on marketplaces, like most everywhere else “you only get one chance to make your first impression”.
- Avoid the “commodity trap”. Marketplaces are as close to the economist definition of “perfect market” as you get. Full and complete product/sales information is available to buyers and sellers presented in a way that facilitates shopping comparisons and transactions. As information is near perfect, your brand and content is king – both must outshine your competitors if you are to maintain differentiation and avoid margin pressures.
- You will never compete successfully with Amazon. If any manufacturer or distributor sells exactly the same product as Amazon or AmazonSupply.com, usually Amazon wins. For this reason, a key decision is whether you “sell to” or “sell through” these separate entities. Both options have significant benefits and consequences that must be fully understood.
- Consider testing FBA/Amazon Prime. The only way to get access to the lucrative Amazon Prime customer base (estimated to be some 12-15 million loyal buyers that buy 6-7X a regular Amazon customer) is to sell through FBA. It’s also a good way to learn Amazon’s logistics and compare them to your own in-house fulfillment.
- Read the reviews on Amazon and eBay. Amazon/eBay reviews are a great source of new product/service ideas. Read all competitive reviews thoroughly as they will suggest to you how to create new products and services and better satisfy marketplace shoppers. It’s free and valuable product and competitive research.
- Marketplaces are benevolent dictators. Whether it’s Amazon, eBay, Rakuten, Sears, or New Egg they all have their systems/rules that the sellers must comply with. You must sign their contract; follow their inventory/fulfillment procedures, live with their returns and payments policies, etc. This is a significant administrative burden/cost. That being said, there are a myriad of ways to work their systems to your advantage and automate administrative processes to reduce your selling costs.
- Selling on Amazon is a full time job. The DM maven Ron Popeil maxim of “set it and forget it” does not apply to selling when it comes to marketplace selling. Marketplace selling requires minute-by-minute monitoring and management. It requires smart thinking, instant decision-making and constant oversight. Also, remember, not to re-invent the wheel. Learn from the experience of other B2B sellers and software providers.
- Marketplaces are re-shaping B2B distribution as we know it. We strongly believe that B2B marketplaces can only be ignored at your peril. Many B2B sellers are fearful of Amazon competition and have tried to avoid “playing the game”. Others have embraced We believe that the market power of Amazon is so big it can no longer be ignored. Amazon, eBay, Sears, NewEgg (all of which have dedicated B2B marketing staff) and others are changing the structure of the B2B distribution world and you must learn how to play the marketplace game or be relegated to the competitive sidelines.
- Opportunity Abounds. You only have to look as a far as all the new online competitors in your industry who have grown from zero to millions in the last five years to know that many companies are doing very well on the marketplaces. Several of them are our clients and I am always amazed when I learn that a company that did not exist 5 years ago now has sales of more than $30, $40 or $50M. What are more impressive is the variations of the new marketplace selling business model. It seems like no two are exactly the same. Suffice it to say, creative, young entrepreneurs and established companies alike are doing very well in this space and opportunity abounds.
Comments or questions are welcome.