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.