In the yester years of B2B sales—and let’s be honest, it’s still happening today—manufacturers worked directly with value-added resellers (VARs) to sell their product. VARs meet one-on-one with business leaders to provide meaningful sales experiences centered on a product, offering consultations or trainings with each sale. Historically, when manufacturers wanted to expand their reach into the market, they’d just sign up more VARs. These days the world of business sales looks much different.
The rapid growth and popularity of B2B ecommerce and online marketplaces has shifted buyer behavior dramatically. Buyers aren’t going through VARs anymore. They’re hitting the web, making the traditional way of doing things more challenging and less lucrative.
Here’s why buyers are buying your products online instead of through your VARs and what it all means for your business.
Amazon has made online shopping easier than ever, and not just on the consumer front. Businesses, too, are taking advantage of online purchasing in large numbers.
Amazon’s business-only platform, Amazon Business, has seen record growth over the past few years. During Amazon’s Q1 for 2017, 40% of B2B shoppers finished their business purchases on the business platform. In May of this year, it hit $25 billion in worldwide annualized sales, and Amazon Business’ gross sales grew 2.9 times faster than the total sales for Amazon, according to Digital 360. Currently, Amazon Business serves over 5 million businesses.
Amazon Business is unique, because it enables third-party sellers of any size to sell to large organizations. As the name suggests, it’s tailored specifically to businesses, allowing them to browse a wide selection of business-only products with special pricing. There’s a large appeal for B2Bs to operate there, especially at a time when B2B ecommerce is at an all-time high.
B2B ecommerce is projected to increase to $1.8 billion by 2023, and Amazon is fully plugged into that growth. According to Jeff Bezos, former CEO, Amazon Business remains a priority for the corporation as they look to expand, and Amazon sees itself as direct competition for industrial supply corporations like Grainger and Staples.
In short, customers and businesses are flocking to Amazon Business in droves as it explodes in growth, leaving the old model of buying through VARs behind.
Amazon Business and other B2B ecommerce platforms are growing in popularity, but why? Look no further than the segment of buyers largely driving that popularity: Generation Y.
Millennials are quickly becoming the primary consumer segment in the United States. They’re also taking more mid and upper-level management positions, giving them more power in B2B strategy and buying decisions. Unlike generations before them, Millennials are almost innately web savvy, and because their buying habits differ so dramatically from those of previous generations, marketplaces have shifted to make space.
According to a recent McKinsey report, 2/3rds of buyers prefer remote human interactions or digital self-service to traditional interactions with a supplier. Millennial buyers in particular are looking for ease-of-purchase experience, and they find more value in self-education on online channels than in speaking with a sales rep. Millennials want to shop for their businesses the same way they shop for themselves, and that means more ecommerce and marketplace transactions and less transactions that require a middleman.
When brands purchase products through VARs, the process can be tedious and inefficient. They first have to talk directly with a salesperson. They then have to submit a PO and often wait weeks for their products to ship to them. Why would a brand do their B2B business this way when they could otherwise purchase products from Amazon and have them in-hand in two days?
Businesses are buying online instead of one-on-one through your VARs because buying online is much easier and more efficient. Over 60% of product searches begin on Amazon. That’s a huge indicator of how critical ecommerce is.
The truth is your products will eventually make their way online whether you intend for them to be there or not. Because VARs are very aware of the opportunities that can be found on platforms like Amazon Business, they may be the ones listing your products. While it’s great for your brand to have some kind of presence on ecommerce marketplaces, it can also present problems if the VARs doing the listing aren’t ecommerce savvy.
While brands may find plenty of success offline, offline success does not equate to online success, nor do good offline partners automatically make good ecommerce partners. Often, in fact, your best traditional partner will be a poor ecommerce partner, because no one can be good at both.
Though a VAR may be highly educated in selling your products, they will not be as familiar with the complexities of Amazon. They won’t be as dialed in to your brand messaging, they might not put the right keywords in product listings, or they might list pretty mediocre images or copy that are a poor reflection of your product. Without the same care that you have for your product, this can be a real detriment to your customer experience. It can also be a detriment to your margins if you have a slew of VARs selling your products and very little control in the online space.
The VAR model of having as many distributors as possible simply doesn’t work anymore, online or off. The wider your distribution network, the higher the chance that unauthorized sales activity and price erosion will occur. A VAR can underprice your product, and just like that, they’ve negatively impacted every other distribution partner you have across all channels because those partners are forced to lower their own prices to compete.
Ecommerce marketplaces matter. They’re the now and the future, so having control and having partners that know what they’re doing is key.
It’s true—the traditional way of conducting B2B business is rapidly becoming a relic of the past. As more and more brands and consumers flock to online channels, watching the online space closely for opportunity and having a strong ecommerce strategy is critical for long-term success.
If you’re looking to improve your online presence, take control of your brand online, and enter the Amazon Business space with the best strategy and partner for your brand, Pattern can help. Our Predict software is the best in the business for assessing what is and isn’t working for your brand on Amazon and helping you hone everything from your advertising, reviews, and listings to your product design and brand control.
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