For B2B Sales, When Is Amazon Business Worth a Look?
February 2, 2018
Companies in the business-to-business (B2B) sector need a steady flow of new corporate customers, and many are considering whether Amazon Business is right for them.
The marketing and fulfillment platform has more than a million business customers and exceeded $1 billion in sales during its first year, according to Business Wire.
But is it right for your business as a seller? That depends on how you carefully balance the potential benefits and drawbacks.
Benefits at a Glance
Begin by understanding the central features and benefits of the Amazon Business seller program. Amazon requires an employer identification number (EIN) and vets businesses before they’re allowed to sell on the platform. So, potential customers can be confident they’re dealing with legitimate enterprises.
Products can be offered exclusively to business customers. This exclusivity allows sellers to adopt other pricing strategies for retail purchasers on Amazon or through their regular sales channels. Amazon’s search functionality makes it easy for buyers to find the specific products they seek, just like the business-to-consumer (B2C) side of Amazon.
Additional functionality for business buyers includes an analytics feature that helps buyers track multiple facets of their purchasing operations. Sellers can “claim quality, diversity and ownership credentials” to distinguish themselves from competitors when buyers search for suppliers using such criteria. Volume discounts, payment terms and sales tax can be automated.
But what’s highest on the list of benefits for selling via Amazon Business? The prospect of being discovered by a world of potential customers.
Prospective customers who have had positive experiences with Amazon’s payment and fulfillment services will expect the same with a B2B transaction. These experiences are essential when dealing with prospects who don’t know anything about your business, as Amazon’s positive reputation will give you credibility.
Amazon asserts its business sellers are held to higher performance standards than sellers on its consumer platform, which include:
- A pre-shipment cancellation rate of below 1 percent
- Late shipping rates of less than 2 percent
- Fewer than .5 percent order-defect rates (e.g. returns and/or charge-backs)
- A tracking number and packing slip on every business order package
- A purchase order number with every order when provided by the customer
But just as potential new customers might discover your business, they’re also likely to find competitors when searching for products. That might limit your ability to price aggressively, even if your products are superior.
With Amazon handling fulfillment, you can’t acquire information about customers. Customer data belongs to Amazon, limiting your ability to develop relationships with new customers. Amazon itself might become a competitor at a future date, using the customer data it acquires to market to your audience.
Your brand identity could also be diluted by the Amazon brand, as Amazon largely controls the way products are presented.
Amazon charges a commission, typically between 6 and 15 percent. That might be higher than the costs you incur when selling directly to business customers.
Keep an Eye on the Prize
Weighing the pros and cons will help you understand if this service is right for your situation. Consider your company’s existing reputation, brand visibility and current e-commerce capacity.
If you’re not set up to sell goods efficiently through the Internet, you could give Amazon Business a trial run. On the other hand, if you already have a robust e-commerce sales and marketing operation, it might be better to conduct a broader assessment before potentially going into competition with yourself on Amazon.
A CPA-led financial advisory firm can help you explore all the factors. If the benefits don’t add up, you might want to look the other way.
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