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Amazon’s White-labeling Practices Represent a Threat to Distributors

What Industry Will They Target Next?

Given the way Amazon has disrupted the consumer-facing retail space, it’s no surprise that many distributors view Amazon Business, the company’s B2B platform, as a sleeping giant within B2B eCommerce.

Distributors can approach Amazon two ways: as a new digital channel through which to sell their products to more buyers, or as a potential long-term threat that could redefine how they sell online. Recent pushes by Amazon to white-label B2B products and push its own brands above competitors have the potential to tip the scales towards to the latter. Given the distribution industry’s eCommerce vulnerabilities, it’s helpful to understand how Amazon has the potential to white-label distributors right out of business.

The Rise of White-labeling

Amazon’s first disruption to the retail industry was its ability to give consumers lower prices on the brand-name products they want. The next big shift is undercutting those brands with Amazon’s own branded and white-labeled products. On the consumer-facing side, the company has added a feature that showcases its own brands before consumers add competing products to their carts. And Amazon’s products go beyond low-cost items and home essentials, to now include multiple furniture brands.

While customers may welcome lower prices and more competition, Amazon isn’t stopping at consumer goods. This summer it launched AmazonCommercial, a bulk supply line of toilet paper, tissues and paper towels. It’s a move that should have Janitorial & Sanitary Supply distributors upset, as it has the potential to undercut some of their highest-selling products.

AmazonCommercial represents a move by the eCommerce giant to white-label popular, high velocity items typically carried by Janitorial & Sanitary Supply distributors.

Losing Data to Amazon

Distributors in other market segments may balk at the idea of Amazon encroaching on their territory with white-labeled products, but if the eCommerce giant moves into Jan-San, it’s not far-fetched to think other B2B industries are coming in the future.

Amazon Business has attracted tens of thousands of B2B sellers, and many of them are likely making a profit thanks to Amazon’s ease of use and familiarity. But every one of these sellers is making a big sacrifice, because they don’t own the data around their sales and orders. Instead, Amazon owns those insights. It knows about the fastest moving items and what buyers are searching for, and what items typically sell together. Amazon can leverage that data lake to produce its own white-labeled products and promote them above other search results.

If distributors choose to partner with Amazon Business, they too, will surrender that data, and Amazon can see firsthand which low-cost generic items it can sell in high volumes. For example, let’s consider a medical supply distributor. Target items could be anything from syringes to tongue depressors to amyl nitrate gloves to otoscope specula. And there’s really no reason to assume Amazon would stop at low-priced items, either, considering its forays into home furnishings. If there are potential profits, Amazon is likely to explore them – you don’t come to dominate eCommerce by passing up new revenue opportunities.

Proceeding with Caution

Fighting against Amazon’s white label products can quickly become a war of attrition. Amazon charges enormous prices for brands to get a decent placement on the site, so it would be costly for any distributor to try to compete against Amazon’s in-house brands.

Distributors need to proceed with caution when it comes to building relationships with Amazon. While the platform might provide a short-term revenue opportunity, Amazon’s data ownership and white-labeling practices present a longer-term risk.

The best path forward is for distributors to focus heavily on conveying their depth of product knowledge through their own digital presence. This includes their eCommerce channel, corporate website, and social media accounts – basically, anywhere the brand is active online.

As part of this strategy, distributors should invest in their product content, creating more convenience for customers and putting information at their fingertips. This may be as simple as having sales reps record short product demonstration videos, and then uploading that content to a blog, YouTube, or LinkedIn.

In highly specialized fields, it’s critical for distributors to position themselves as the most knowledgeable source on the items that they distribute. That institutional knowledge, accrued from years of working with customers and solving their challenges, is the single greatest piece to leverage. Best of all, it’s something that Amazon can never match, not with all of the data in the world.

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