When I joined Mirakl in 2016, Amazon was having such a meteoritic rise that retailers were either seemingly paralyzed or filing Chapter 11. A year prior, Amazon had turned AmazonSupply into Amazon Business, but it was a bit under the radar, and manufacturers and distributors were not yet concerned.
As 2017 unfolded it got worse – Amazon’s ever-growing “everything store” presented customers with almost unlimited options, great prices, and incredibly fast shipment. Consumers were hooked, retailers were scared, and business buyers started to want the “Amazon-experience” for work purchases.
That’s no moon…
Amazon Business had managed to hit $1B in 2016, their first official year of operation. While this represented only a small percentage of the B2B e-commerce market, the pace of growth was difficult to ignore. Manufacturers and distributors started to watch – with the benefit of hindsight, having seen iconic retailers decimated in recent months.
We started to witness ‘The Amazon Effect,’ which is when Amazon announces a strategic acquisition (i.e. Whole Foods’ acquisition announced in June 2017, which immediately triggered a significant drop in stock price for Kroger, Target, and Walmart, among many others). On the B2B side, Amazon would announce the growth of their business-relevant products, and W.W. Grainger experienced a stock price nosedive which hit its bottom in August 2017.
And then – to the theme of this week – the Rebel Warriors showed up. And it’s not just Grainger’s stock price that recovered. This Star-Wars themed video offers a quick summary of what’s on the horizon when it comes to e-commerce:
It’s important to clarify the underlying model fueling Amazon’s success – the marketplace model – has been the center of their strategy.
In Jeff Bezos’ recent shareholder letter, Bezos made it clear how Amazon has built their business on the backs of third-party sellers. The opening of the letter notes that 58% of Amazon’s sales are driven by third-party sellers. He goes on to say “Third-party sellers are kicking our first party butt. Badly.”
Partner-centric business models: A new hope
In the last 18 months most companies realized it was time to fight back – and in many cases – that meant fighting fire with fire. That meant launching their own marketplace of third-party sellers – or third-party rebels.
Amazon’s rise has continued – hovering at around 50% of US e-commerce in 2018, with Amazon Business reaching $10B in the two years. But what’s different is that retailers, brands, manufacturers, and distributors alike have made moves. They’re fighting back; many by launching their own online marketplaces.
The pie is big enough for everyone to succeed. The companies that will have the greatest success will understand the importance of partner-centric business models – as Amazon, Alibaba, Uber, Airbnb, and Farfetch have done.
This business model is not just for them. Within your business the Force can be, too.
