Category: Selling Cooperatives

Bookshop.org Revisited

On April 23, 2021

Who doesn’t like a good anti-Amazon story?

Bookshop.org launched in the US and UK as an “ethical” alternative to Amazon, allowing independent booksellers to create a virtual store front. If someone bought a book specifically from one of the participating stores, that bookseller would receive 30% of the cover price from the sale. When a sale was made and not linked to a specific bookseller, 10% of the cover price would go into a pot that was split equally amongst all of the booksellers.

When this platform launched, it was greeted with great public enthusiasm from independent bookstores, publishers, authors, and readers – including myself. Finally, here was a model to help independent businesses sell online.

Complaints from booksellers have been growing. Bookstores would normally make between 43 and 50 percent on a book, much more than the 30 percent offered by bookshop.org. Tamsin Roswell, a bookseller at Kenilworth Books says the platform is “attempting to homogenise all indie bookshops.” The biggest fear seems to be that rather than stealing customers from Amazon, the site is stealing customers away from the independents themselves.

Now, don’t get me wrong. I believe that bookshop.org’s heart is in the right place. They applied for B corporation certification, a designation for businesses that meet high standards of social and environmental “purpose”. As Andy Hunter, CEO of the website says, they are pushing for “a sea-change in consumer behaviour that protects independent bookstores.”

It’s not the intentions of bookshop.org that bother me, but rather their ownership model.

I firmly believe that the long term needs of independents are best met through a cooperative model where ownership and responsibility is shared equally by members under the principle of “one share, one vote”.

Under a cooperative structure, independents would be in control of their own destiny. The competition and tension amongst independents who previously were allies would be removed. The voice of each independent would be preserved as would the individual strengths each brings to the table.

Cooperatives need to stop shying away from technology and help their members sell. Software platforms designed for purchasing cooperatives, such as the LBMX Marketplace provide a National Accounts module designed to help B2B sellers compete online. Coops such as Home Hardware in Canada have embraced online B2C selling on behalf of their members.

So while it was understandable that supporters of independent businesses, such as myself, were excited by the potential “ethical alternative” to Amazon, we forgot to look at it from the perspective of the independent. We forgot that the cooperative or purchasing cooperaive model continues to be the best model to support independent businesses.

At the end of the day, “independence” is what makes independent bookstores and other businesses special. Any solution supporting independents needs to keep this in mind.

Members Can’t Beat Amazon; Groups Can (Part 3 of 3)

By Steve_Seguin

On March 27, 2020

In Selling Cooperatives, Strategy, Technology

This is part three of a three part series. Part one outlined Amazon Business’s platform model and how the traditional strategies of member-distributors will not be competitive. Part two proposed a buying group-based strategy to compete through the creation of a new marketplace owned jointly by the membership. In part three, below, I outline more specific features of a marketplace allowing you to compete against Amazon.

Recreating Amazon’s marketplace is a sure route to failure. Sure, there are elements worth adopting – powerful search, user reviews, simple check out procedures, etc. – but rather than emulating Amazon, focus on your member-distributor’s strengths and Amazon’s weaknesses.

Amazon thrives in two areas – product information and data collection. While Amazon knows their customers, they do not know their customer’s business. Amazon doesn’t have the same level of expertise as your members do. Amazon doesn’t have your reputation and relationships within the marketplace.

A group-driven marketplace should include the following features:

1. B2C User Experience

Millennials will make up the majority of marketplace users, and they want their experience to be identical to their B2C shopping experience. An intuitive and user-friendly experience is a must. Personalization and predictive ordering are a must.

2. Helpful Product Content

The best way to attract more web traffic is to add more content and more helpful guidance to every product on your site. Create a blog where you discuss business topics of real concern to the people who use your products.

3. Offer Unique Products

Offer products that Amazon does not. This could be as simple as bundling a number of related products into a kit with a lower total price, or it could mean creating private label versions of existing high margin products.

4. Strong Customer Service

Customer service in the B2B world means solving problems. Dedicate knowledgeable sales reps who know their buyers and products to your site. Provide human touch points. Provide multi-location logistics. Strong customer service should not be anything new for your members – figure out how you can apply what your members already do to the web. Amazon cannot compete with a human experience.

5. Build a Hybrid Marketplace

B2B customers will always require an experience that includes both full service and online capabilities. Build a bridge between the online and offline worlds.

6. Maximize Your Data

Route your eCommerce data into a good business intelligence tool that will help you understand what is working and what does not.

7. Think About the Full Customer Experience

B2B eCommerce is not all about ordering products. How do your customers create claims? How do they deal with payment issues? Where do they discuss terms? Are they eligible for rebates? Where can they receive training? Are there product shows that they can attend? Make sure your marketplace makes the full customer experience a rich one.

The key to competing against Amazon is to bring the natural strengths of your member-distributors to the online world. A central group, owned by the members, can provide the leadership, guidance, and operational staff to creating a marketplace where members can compete on a level playing field.

Members Can’t Beat Amazon; Groups Can (Part 1 of 3)

By Steve_Seguin

On March 25, 2020

In Selling Cooperatives, Strategy

Independent member-distributors will not be able to beat Amazon in B2B e-commerce. There, I said it. Sure, they may be able to compete short term against Amazon, Wal-Mart, Wish, Houzz, or any of the other giant marketplaces vying to dominate the playing field, but they can’t win this battle alone in the long run.

It shouldn’t surprise you that B2B e-commerce is on the rise. According to research data from Forrester, e-commerce will make up about $780 billion in B2B sales – about 9% of all B2B sales – in 2019. They are predicted to reach $3 trillion globally by 2024.

This trend is as much of a threat as it is an opportunity for your member-distributors.

The most disruptive trends in the B2B environment of the last three years have all been related to the rise of B2B eCommerce:

Digital Shift. Competitors and customers have moved online, and customer expectations have evolved
Amazon and other Marketplaces. These marketplaces want your data and your customers
Disintermediation. Manufacturers and customers are increasingly trying to remove the middleman

In general, member-distributors, if they have responded at all, have responded with two strategies – digital innovation and mergers and acquisitions. Unfortunately, neither of these strategies can work without a true understanding of Amazon’s B2B marketplace and its threat to the independent.

First, some history. Amazon’s original foray into B2B distribution did not look like it does today. In 2012, their first attempt to enter this market took the form of Amazon Supply. Amazon Supply followed a traditional linear business model where Amazon owned all the inventory it sold. This approach ultimately failed because it could not compete on price.

Learning from their mistakes, in 2015 Amazon launched Amazon Business, a true B2B marketplace. Disruption since then has been swift, and distributors have struggled to respond.

Why haven’t independents been able to respond and gain their footing in the digital world?

Member-distributors all too often answer this question with their own fatalistic question: “How can we compete against someone as big and as technologically sophisticated as Amazon?”

This question, as well as the strategies of digital innovation and acquisitions, are blind to the biggest reason for Amazon Business’s success. Many distributors have built web- and app-based B2B portals rivaling Amazon in sophistication which have nevertheless been unable to compete with Amazon.

Amazon isn’t winning the B2B war because of their size or their technology. They are winning because of their platform business model.

Amazon Business is a B2B marketplace, or platform, that connects buyers and sellers, taking a commission on every sale. This model has allowed Amazon to grow exponentially since each new producer and consumer increases the value of the marketplace for other users.

Distributors who simply migrate their existing linear business model to the web or who acquire a new location (within the same vertical or an adjacent one) fail to understand the crux of Amazon’s threat.

In part two of this article, I will outline a strategy for buying groups and purchasing co-operatives that would allow their independent member-distributors to successfully compete against Amazon and other platform providers.

Sales Cooperatives?

By Steve_Seguin

On December 11, 2008

In Selling Cooperatives

Would the idea of a “sales co-operative” be that crazy?

For decades, purchasing co-operatives have flourished, giving independent businesses economies of scale to get lower costs from suppliers. In a traditional purchasing cooperative, independent businesses, who might otherwise be competitors, agree to negotiate together with their suppliers to achieve better terms, lower costs of goods, and, most typically, higher rebates. Over time, some purchasing cooperatives have expanded to provide additional services, such as centralized billing, marketing, private label products, product training, and a host of other services or functions too cumbersome or expensive for an individual business to do on their own.

The cornerstone of purchasing co-operatives is the idea of “one member, one vote”. Each individual business, or member, that belongs to the cooperative shares equal ownership of that cooperative. Regardless of how big or small a business may be, they only have a single share and a single vote. This ownership model provides a uniquely democratic foundation for doing business.

Ultimately, the goal of purchasing cooperatives is to help independent businesses survive in an age of “big box” corporates, private equity buy outs, and online giants. Traditionally, they do this by focusing on cost savings within procurement and operations.

But what about selling?

In a recent article, MDM’s Ian Heller speculated on the creation of a joint B2B e-commerce platform to rival Amazon Business. He proposed that if the distributors in various industries joined together in some form of jointly funded initiative, they could not only rival but outdo Amazon at the B2B game. Independent businesses could leverage their strengths – services, customer support, and product knowledge – in a way that Amazon could not.

The main question after reading the article is how would such a platform get created? Who would take the lead? What kind of ownership model would be used? How would decisions get made? How would it get funded?

This is where the idea of a “sales co-operative” comes in.

Why not adopt the model of a purchasing co-operative be altered and adopted to fit this need? Independent businesses joining together under the idea of “one member, one vote” to build a new B2B platform. Let the seven cooperative principles act as a guideline for running the joint business. Individual members of the new sales co-operative could still compete against each other based on their own strengths but on a level playing field provided by a common B2B platform.

Most importantly, a sales co-operative, like its purchasing cousin, would help independent businesses survive by leveraging their collective strength. As Benjamin Franklin once said, “If we do not hang together, we will all hang separately.”