25 Oct Amazon Business Launches Business Prime Shipping
Amazon Business today announced the launch of Business Prime Shipping. With tiered pricing to receive unlimited free two-day shipping, Business Prime Shipping costs $499 for up to 10 users, $1,299 for up to 100 users, and $10,099 for over 100 users.
It is important to know where Amazon derives revenue. According to their annual reports, there are three key pillars:
- Amazon Prime
- Amazon Web Services (AWS)
- Amazon Marketplace
Where did the idea of Prime come from? In the book “Everything Store”, the author Brad Stone states that a 2001 coffee meeting between Jeff Bezos and founder of Costco, Jim Sinegal was the premise for the Prime program. Sinegal told Bezos, “Costco buys in bulk and marks up everything at a standard, across the board 14 percent, even when it could charge more. It doesn’t advertise at all, and earns most of its gross profit from the annual membership fee.” In 2002, Amazon introduced a new service called Free Super Saver Shipping for orders over $99, that quickly dropped to $49, then $25. This set the stage for the new subscription club membership Amazon Prime.
And now we have Amazon Business Prime. I believe we will see the same results where Amazon derives most of their revenue from Amazon Business from the Prime program not on the backs of the products and product margins.
Here is the problem
If Amazon is not making profit on selling products, then they can commoditize the pricing of products – even complex and expensive ones.
A Perspective for Distributors
With shipping speed and shipping costs, being a pain point, how can independent distributors compete? First of all – Amazon has not yet figured out how to represent their complex products with complex facets and attributes. This is an opportunity for any distributor – because you are focused on a niche, you can represent just the products that are your specialty and build your customer experience (CX) around your customer buying journey.
- Consider preferential shipping pricing structures (like loyalty, membership, or top-tier) to reward your best customers
- Consider providing rebates and/or membership programs for your online orders.
- Keep improving your product data, to make navigation and search faster, smoother and more rewarding, than searching in the huge assortment that is Amazon
- Drive customer relationships with Digital PLUS your current strengths and competitive advantages:
- Responsive, reliable and friendly customer service
- Chat, phone customer service, email
- Depth of product knowledge
- Emergency services and support
- Services: everything from installation and vendor-managed inventory to education and events
Digital PLUS has to be your approach. Digital PLUS what? PLUS your competitive advantage – the personal service, your product knowledge and subject matter expertise, or other services your provide. However, Digital PLUS means you have to get the Digital part down too…
Amazon is a force to be reckoned with, and one that’s not going away fast. While you can’t pretend that your customers aren’t going online, it is imperative to optimize your digital experience and triple-down on your strengths. Triple down on Digital PLUS your competitive advantage within your DigitalBranch.