Innovators like Amazon are rapidly and aggressively moving into B2B commerce and posing a huge challenge to traditional players across the supply chain.
Depending on your viewpoint, Amazon can either represent an opportunity or a threat. So, how should manufacturers respond? Gareth Carroll from Oracle NetSuite took to the mainstage to find some answers.
Carroll noted that today’s businesses typically have four priorities: revenue and profitability growth, embrace digitalisation, customer retention, and attract new talent.
Unsurprisingly, these priorities are closely aligned to their top concerns: increase operational efficiencies, adopting new technology (AI, data science, blockchain), inventory optimisation, decrease order cycle time for today’s ecommerce world, and Amazon’s increasing dominance.
“A significant portion of new sales growth for industrial equipment manufacturers is coming from connected equipment with sensors, actuators, and analytical insights that can exchange critical data with other machines and computer networks,” Carroll commented.
“Data shows that across all industries, companies that ringfence money for R&D spending on software earlier than their competitors enjoy greater revenue gains.
“The primary aim at this point should be to get out in front of the digitisation trend via strategies that free up capital to invest in emerging technologies that will enable a potentially significant revenue stream in the future.”
“One thing I love about customers is that they are divinely discontent… people have a voracious appetite for a better way. Yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’, Jeff Bezos, CEO of Amazon.
“Amazon have one primary obsession –customers. They embody a ‘customer first’ attitude, offering personalised shopping experiences and because of their deep financial backing and lower profit percentage expectations from Wall Street, they don’t compete in traditional ways,” Carroll said.
The impact of innovation
Carroll asked the audience to consider the impact of innovation on two industries almost all of us are familiar with – the film industry and taxis.
Blockbuster Video used to be the market leader in home rentals but was slow to recognise and adapt to the rise in television and movie streaming.
They also failed to understand an evolving customer base who demanded convenience and a better entertainment experience. Today, Blockbuster is gone, and Netflix is the new market leader.
While not as extreme of an example, as there are still taxis in existence, the entry of Lyft and Uber to the marketplace has brought significant disruption.
Recognising customers’ frustration with the inconsistency of service, wait times and traditional pricing structures, Lyft and Uber leveraged new technology to provide an alternative and the ride sharing industry will never be the same.
“This is happening in every industry across the board. Companies who refuse to recognise their customer’s needs and embrace today’s technology are being out innovated, and risk being wiped off of the map completely,” Carroll warned.
Amazon has built a unique set of capabilities, it is a software company; a cloud company; a manufacturer; an online market place; a logistics company; an AI leader, and a distributor.
Most Amazon competitors are just one of the above, Amazon is a leader in all of the above.
What’s more, Amazon launched its own B2B marketplace – Amazon Business – in 2015. At the end of the first year, it was worth $1bn in sales. Today, just four years later, Amazon Business is already heading towards the $10bn mark.
“Amazon Business combines the selection, convenience and value customers have come to know and love from Amazon, with new features and unique benefits tailored to businesses,” Carroll explained.
“It offers a selection of hundreds of millions of products, everything from IT and lab equipment to education and food service supplies, as well as business-only selection and pricing; and offers free two-day shipping on millions of eligible items, single or multi-user business accounts, approval workflow, payment solutions, tax exemptions, dedicated customer support and much more.”
Worryingly, Amazon is also probably 10 years ahead of most other companies in terms of how they use data to personalise digital experiences, and evidence shows that many business buyers are already buying on Amazon, which means that “British manufacturers have a brutal reality to confront”, Carroll noted.
Amazon – friend or foe?
Despite their seemingly insurmountable presence, Amazon does offer several opportunities for forward-thinking businesses:
- Smaller companies appreciate the market reach offered by Amazon – in particular if their products become best sellers.
- Companies that want to enter or test new markets or geographies can leverage the multiple Amazon domains and even have them do fulfillment.
- For well-established brands that get invited to the Amazon Vendor Central program to be a direct supplier to Amazon, this can be a way to quickly expand online presence.
The best way to compete with Amazon, is to learn from them, Carroll concluded.
“Your business needs to become customer obsessed, it needs to analyse what Amazon and other disrupters or doing, embrace technology and most importantly, act now!”
Manufacturing Leaders’ Summit has been bringing together senior industry executives for more than a decade, and is the biggest manufacturer-to-manufacturer conference in the country.
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