Amazon Business caters to 1 million customers of all types and sizes, and it serves as a marketplace for some 85,000 sellers. Companies that haven’t begun selling on it should check it out—but tread carefully, veteran marketplace seller Brian Fricano said during a presentation at the IRCE B2B Workshop in Chicago last week.
Fricano, a former sales executive at industrial and office products distributors W.W. Grainger Inc. and Brady Corp., is founder and CEO of Sustainable Supply Co., an online distributor of more than 1 million products ranging from building materials and plumbing supplies to equipment that companies use to maintain, repair and operate their facilities. Launched in 2009 with the website SustainableSupply.com, it also operates the B2B e-commerce sites EyewashDirect.com, PortableHandwashing.com and sells through Amazon and other online marketplaces.
Fricano suggested other key marketplaces to consider include NeweggBusiness, for computers and related I.T. products; Direct Supply DSSI for products in the long-term healthcare market; eBay, which is expanding in industrial and business categories; and SAP Ariba, a procurement network that directly integrates with SAP enterprise resource planning software.
Amazon Business, the business-to-business arm of Amazon.com Inc., offers a good way to reach a huge audience and build a brand image and sales, but not without costs, risks and the requirement to meet Amazon’s strict requirements, Fricano said. Seller fees on Amazon Business, where sellers can ensure they sell only to registered business buyers, range from 12% to 15% of transaction value.
Selling on Amazon Business also means meeting Amazon’s operating standards, including a product in-stock rate of 99% or higher, and investing in software for integrating product data and managing product listings. “Amazon’s service expectations will “most likely surpass your own,” Fricano said, noting that software for managing product listings “is absolutely necessary and can be costly.”
“It’s a good opportunity to widen your market,” but choose your product mix carefully and “never offer your lowest price” on Amazon, Fricano said.
He also warned that exposure to a large volume of online customers is likely to result in a high volume of orders—but also “lots of returns” and a low rate of repeat orders.
The do’s on Amazon Business:
- Start small and learn fast;
- Carefully choose products to sell on Amazon, focusing on those not already widely available on Amazon;
- Be aware of the lowest prices for comparable products on Amazon, to avoid situations where they undercut your best price;
- Analyze whether it makes sense to sacrifice gross margins to gain higher order volume on Amazon;
- Offer better pricing and delivery times than competitors in order to win the Buy Box and get the sale;
- Consider shipping via Fulfillment by Amazon (FBA) to see if it results in more orders.
And the don’ts:
- For government contracts that require “most favorable costs,” ensure that your Amazon pricing doesn’t fall below your contract pricing;
- Never offer your lowest price on Amazon.
- Don’t make Amazon your sole channel, but use it for incremental sales and brand exposure.
- Don’t bet the farm on it.
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