Amazon Expands E-Commerce Opportunities

Julie McLaughlin

Julie McLaughlin is the Senior Director of Publications/Publisher for Insulation Outlook magazine. Her responsibilities include all NIA publications, MTL Product Catalog, website management, and IT. She can be contacted at 703-464-6422, ext. 116 or publisher@insulation.org.

September 1, 2016

Amazon’s E-Commerce Options Offer Opportunities for the Construction Realm

Amazon is an e-commerce giant. It has dominated for a decade and is making inroads into the construction market. Is Amazon Business an asset for your company or a competitor? What will it become?

After tremendous success in the consumer market, Amazon has entered into several business-to-business (B2B) areas relating to the construction and insulation industries—and the expanse of their activities might surprise you. On the retail front, it currently offers products in the categories of “Safety Equipment & Supplies, Emergency Response Equipment, Lockout & Tagout Products, PPE: Personal Protective Equipment, and Safety Signs and Signals” and are encouraging companies to become Amazon business partners and sell these and other construction-related materials.

Amazon also offers a Seller Program open to any company interested in selling products on its site, and has a Vendor Program for manufacturers and distributors. Additionally, they have expanded to allow insulation contractors, general contractors, and HVAC specialists to list and sell their company’s services to their expansive
business-to-consumer (B2C) clientele, which will surely grow into the commercial market and be paired with their growing B2B presence. For people not selling or buying on Amazon, they offer cloud services, e-commerce payment options, and even an advertiser program. Amazon may become a competitor for some construction and insulation companies, while other companies may find ways to utilize their services or build their own mechanisms for e-commerce growth.

Amazon has a number of business offerings that may help businesses that wish to develop their e-commerce options. Its offerings include:

  • Amazon Business, the merchandise portal for B2B purchases with corporate accounts and lower “business pricing.”
  • A Business Seller Program that allows all companies to sell their products on Amazon. You control your product’s pricing and have access to Amazon’s inventory, fulfilment, and advertising programs.
  • A Business Vendor Program for manufacturers or distributors to extend their reach by selling to Amazon, which will sell to their business accounts and others.
  • Amazon Home Services, which allows for the purchases of services. Insulation contractors, general contractors, and HVAC specialists can list services by their price or be contacted for estimates.
  • Amazon Payments, which allows U.S.-based web merchants to accept Amazon account
    information and use Amazon for payment processing. Amazon Login and Pay buttons are placed on your existing website and eliminate customers having to fill out forms and provides Amazon’s secure payment portal. Amazon guarantees you will experience sales growth by using them on your website.
  • Amazon Web Services, which are cloud computing services available for any company or website. Far more companies are using it than Microsoft’s Azure or Google’s cloud service.
  • Amazon Affiliate: Become one and Amazon will pay you to post relevant Amazon advertisements on your website. Amazon also offers a different program giving sellers the ability to advertiser their products on Amazon.

To encourage B2B sales growth, Amazon offers Amazon Business, where companies can purchase goods on Amazon for reduced “business-only” pricing. This program offers a number of features that may be attractive to small businesses: they can apply for an Amazon line of credit, buy via purchase order (PO) system, sync up purchases with their existing enterprise resource planning (ERP) system, and receive the shipment in 2 days.  This is a growing area for Amazon, and they affirm that they already have almost half a million corporate business accounts in addition to their 285 million consumer accounts. B2B company accounts can receive the following benefits:

  • Accounts are free for businesses of all types and sizes;
  • Special, discounted business-only pricing, quantity discounts, and price comparisons;
  • Access to Amazon’s fulfillment services with free 2-day shipping on orders of $49 or more, and Amazon Prime compatibility;
  • Multi-user accounts with order approval workflow so companies can allow employees access but still retain purchase manager approval;
  • Download purchasing history analytics to analyze business expenditures and purchasing habits on Amazon Business;
  • Multiple payment options: corporate purchasing cards; Amazon line of credit; tax-exempt purchasing for qualifying organizations; and
  • Purchasing-system integration with many of the major ERP systems.

To expand the type and amount of merchandise offered on Amazon.com, they encourage companies to sell products on Amazon and become part of their Seller Program or Seller Central.  For these sales partners, Amazon shares “a full suite of tools to enable B2B e-commerce, all sizes of businesses, from SBA organizations to large enterprises, will find new ways to engage professional customers in supply chain relationships.” Companies that utilize Amazon’s e-commerce structure will benefit from over 95 million monthly visitors. Some of its technical and logistical benefits include its secure platform, search engine optimization (SEO), its API-level inventory and order management e-commerce structure, and its advertising program, which enables companies to pay to display their ads to customers who are looking for similar products.

Using Amazon as its e-commerce portal means a company will have a wider audience and probably spend less time managing its site or worrying about security concerns than it would if it had built their own e-commerce portal.  In addition to the sales benefits, Amazon offers fulfillment services that utilize Amazon’s storage, distribution, and fulfillment network for a fee. It will even fulfill your private, outside sales in addition to the sales on Amazon.com. You can have your customers sign up for Amazon Business accounts so that they receive those benefits—including lines of credit so you do not have to extend the credit. In this arrangement, they are paying Amazon through their payments system, which can reduce your aging and past due accounts.

A step beyond the Seller Program is the one targeting manufacturers and distributors. Amazon’s Business Vendor Program or Vendor Express allows manufacturers and distributors to sell their products directly to Amazon, which then becomes a full-time distributor of their product. Vendor Program sells products in the U.S., Canada, and Mexico and offers purchase analytics of the sales of products.

Amazon is looking to capitalize on, and expand their offerings in all areas of business, and is taking a multipronged approach to address the needs of its current and future customers and business partners. For companies not selling or purchasing products on Amazon, Amazon still has products to offer. For companies that are interested in cloud services assistance, Amazon offers cloud computing options through its Amazon Web Services. If your company has an e-commerce website, you can utilize Amazon e-commerce payment options that they claim “guarantee growth” of sales and provide Amazon’s security for the company’s own website. Companies can sign up for these services individually or choose to become an Amazon partner and sell on Amazon in addition to their other more traditional sales.

The Drawbacks of Amazon Options

There are potential downsides to buying or selling items on Amazon Business. For companies looking to sell items, they may find they do not have as much control over their branding and that their brand recognition may suffer since customers are buying from Amazon, rather than directly from their business. Similarly, the standardization of the Amazon shopping experience limits the chance of a customer becoming loyal to a business’s brand or being particularly impressed by their customer service. Moreover, there is a cost associated with the use of Amazon Seller, Vendor, or fulfillment Programs. Amazon does take a portion of sales and also charges fees for storage, fulfillment, analytics, and other services.

Easy interfaces and quick shipping cannot replace the trust and peace of mind that comes with knowing that your supplier is an expert and has knowledge of your business. While online stores offer convenience and time savings, traditional supply chain sales and customer service allow construction and insulation customers to get to know their sales representative’s expertise, actually see and feel the products, and become more familiar with products and brands—which for the building industry can be an important part of the purchasing process. Becoming the go-to expert for your customers means you become one of the first people they want to reach out to when they need something. As noted in a recent supplychainbrain.com piece, “Distributors can and should compete on service. Amazon lacks the expertise about the products it sells—something that has been the cornerstone of service in the parts business. Put your extensive product knowledge to work for you, as it’s a key differentiator. Give customers a way to interact with your product experts . . . people who can offer advice on which product is best for the customer’s specific application and share technical information about how to use the product is paramount.”

The ability for a customer to speak with experts who can offer guidance can be limited with online sales. Amazon does offer companies the option of having a “Live Expert” feature, which allows customers to call or email about a product, but that is a far different experience than the in-person relationship sales representatives build with their customers. In the insulation industry, manufacturing and distributing companies have traditionally built relationships with customers over many years, which instills confidence in the product and builds loyalty. That partnership can last decades. Many in the insulation business describe the industry as a family and customers know that they can call anytime for technical expertise. While e-commerce may offer convenience, it cannot yet match the knowledge and resources available from industry experts or answer specific building code and specification questions that often arise.

E-Commerce Growth

As younger, technology-focused workers come into purchasing and decision-making roles, will it become more important for construction and insulation companies to have a website and e-commerce portals? Or will the majority of sales continue to follow traditional sales methods? Would an e-commerce portal allow insulation companies to increase sales for common materials? Businesses that lack an e-commerce site may find that these younger workers may look elsewhere to complete their task and purchase their goods. According to the Pew Research Center, Millennials are the largest portion of the workforce and will be more than 50% of it by 2020. E-commerce is not a trend but a permanent avenue of business. For those who have grown up with technology, websites become the face of a company. Surveys show that these purchasers believe a bad website suggests a company will not be reliable or lacks knowledge, or affirm that they will not even work with a company without a website—and a company will never know the impact of the business they have lost since those who click away will never contact them.  However, not all aspects of e-commerce are right for each business. Companies need to evaluate and determine what is best for their future goals.

Looking Forward

Historically, the insulation and construction industries rely on excellent products, customer service, and brand loyalty. If we look ahead a few years in the future, will e-commerce sales grow in the construction and insulation industry? If so, the challenge that lies ahead is how to meld e-commerce and other technology tools with existing assets. Many of Amazon’s features—like allowing customers to select recurring product orders—could be applied to the construction market. If a manufacturing or distributing company could create a construction jobsite dash button—a device that reorders your favorite products by pressing a button—would their orders increase? The construction and insulation industries will have to investigate all potential avenues, including e-commerce, to discover how they should position their businesses for optimal growth as the industry and its workforce evolve.

 

 

Copyright Statement

This article was published in the September 2016 issue of Insulation Outlook magazine. Copyright © 2016 National Insulation Association. All rights reserved. The contents of this website and Insulation Outlook magazine may not be reproduced in any means, in whole or in part, without the prior written permission of the publisher and NIA. Any unauthorized duplication is strictly prohibited and would violate NIA’s copyright and may violate other copyright agreements that NIA has with authors and partners. Contact publisher@insulation.org to reprint or reproduce this content.

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