The Amazon Effect: What It Means For Local Retail Business and Wholesalers

Joe: All right, good morning. Welcome to the show. If your business isn’t being found then whose is? This show is about your business being found by more buying customers. Chauncey and I are going to make the internet make total sense to you. I am your host, Cloud Wise Joe. And I’ve got my co-host Chauncey Haworth on the other side of the line here.

I flew up to Chicago to talk about Amazon, and it’s effect and what we, as businesses, can do about it. This week has just been full of discussions around that either with other marketing companies or with manufacturers, and I want to share a little bit of that right now.

What I noticed this week was that a lot of companies, and especially manufacturers and wholesalers and distributors who have retail channels, have companies that count on selling their products.

There are brick and mortar places that are buying products from these manufacturers or wholesalers, and these wholesalers still realize even though they have retail locations, they still have to be found on Amazon. Otherwise, they’re not being found and managing what they call diversion. Diversion means if they’re not being found there and they’re not managing that channel, then other companies are earning and benefitting from it.

Those being authorized to sell on Amazon are buying it wholesale, in bulk or maybe closeout merchandise from a retailer and then they’re selling on Amazon. Now that manufacturer/wholesaler or distributor has no control over the prices and the content, so now their retailers are mad. There’s this channel that a lot of these manufacturers and wholesalers don’t even want to be a part of. They know they need to be found there, but they don’t want to be found there because they want their retailers to be successful and sell a lot of products. So there’s this whole discussion going on right now about taking control of the effect Amazon has on these businesses.

Chauncey: Do you find that a lot of them are instead training their retailers to go online as opposed to providing education for their retailers?

Joe: The answer to that is probably even bigger, and that is they don’t know what they’re doing. They don’t know what to do. This reminded me of 10 or so years ago when you and I were on the road to mastering the internet and Google and its impact on business. There is this whole new frontier that businesses have to understand. My answer to this would be that they don’t know that they’re struggling.

One step in the right direction is helping the retailers, and another is getting the manufacturers to hire people or companies that will manage those products, but keep the retail prices high or higher so that the retailers still can survive.

Those other companies that are helping the manufacturer are playing whack-a-mole with all those other strange businesses that come up and sell the products unauthorized. I’m not talking about bootleg, there’s nothing illegal happening, but they’ll buy clothes out, or there’ll be willing to take less or whatever because Amazon doesn’t stop you from selling. It is hard for them to know what to do in the first place. On top of that, it’s hard for the retailers to sell because it’s around 15 percent that Amazon takes from your sales and that is a large sum of your profit, especially when you factor in merchant services and everything else.

Last, Amazon has its own search engine. If you haven’t quite pulled off Google, being available there and controlling where you end up in search, Amazon is going to be overwhelming. You’ve got this whole new world of Amazon with all these different channels like Amazon Fresh which delivers groceries, Amazon Business, regular old Amazon and 15 or 20 different subsets or channels of Amazon that your product can be offered in. There is a whole new front in the war for businesses to understand to get the Internet to work for them and to be found by customers.

Chauncey: Well I’m sure there’s a big hit there because, for every retailer and company that’s even going on Amazon and charging reasonable retail prices, there is an endless supply of peoples trying to sell their merchandise and failing. There is an endless supply of undercutters that don’t make it, but there is always a way to get side by side with those big sellers, and we are here to help your business do that.

Joe: In a way, it appears that pricing and being the lowest price is probably one of the parts of the algorithm for Amazon to share your product. So if you can get lower prices, it’s like having better keywords, in a way. So ironically I think the marketplace is trying to force down prices. In a way, again, the Internet is changing everything for business, we’re going to figure it out, and we’re going to help you understand what to do to help your business succeed.

Thank you for listening to this segment of the Being Found Show, to hear the full show listen here: Being Found Show Episode #47 or subscribe to our podcast.