Amazon seems to dominate every conversation about the future of distribution in the digital age. This is a huge problem, because there needs to be an industry-wide conversation about innovation and change by distributors for the betterment of their customers. If distributors let Amazon dominate conversations, the distribution industry will have little chance to survive on its own terms.
In our first Facing the Forces of Change® Challenge Paper, Creating Innovations and Shaping the Future of Business: A Look at Commerce, Technology and Human Forces in Distribution, we reported on evidence that a movement toward distributors as innovators of business services is underway. This movement is strong, but it is early. Many distributors are leading the way by offering new and improved customer experiences, reinventing partnerships with suppliers and making dramatic changes in the distributor’s own business model. But many more distributors are not.
In the court of public opinion, distributors are far too often viewed as legacy businesses that will present little or no resistance to the modernizing forces of disruption. Distributors must tell their story and build awareness of the positive impact of distributor-led innovations for their customers and our economy. We need to change the conversation to a discussion about how distributors are going to go on offense, innovating distribution’s business models and exciting customers with new and compelling services.
Changing the conversation doesn’t mean sticking one’s head in the sand. Distributors must explore the “what Amazon has to offer” notion (along with all other disruptors) and decide whether to participate — both now and later, and under differing market developments. When distributors are threatened by disruption, they must make plans to defend their business. But, staying on defense is not a path to victory. And endless discussion about Amazon, especially when not in the context of other disruptive forces, is not a path to winning insights.
As a start, let’s move beyond the discussion about whether Amazon is a friend or a foe. Here is why …
If Amazon is a foe, distributors will not find victory by being a better Amazon. Distributors can only win by offering something that is both different and new. Distributors cannot “out Amazon” Amazon. Nor can distributors win by simply polishing what they have always been into a shiny new offering. If distributors are to compete against Amazon, success requires new ideas, new business models, new customer experiences and new supplier partnerships. If we spend all of our creative energy talking about Amazon, we will never speak about distribution’s future. Or worse, we will never talk about a future where distribution prospers.
If Amazon is a friend, distributors will view its virtual market as a necessary means for serving customers. But it is important to note that Amazon may not be the only game in town. Distributors should be aware of other virtual markets and platform businesses and fully explore them. For example, Alibaba has had some activity in North America, offering to work with suppliers through mutually beneficial partnerships. Flexe is a gig economy platform business seeking to become the Airbnb of warehouse space. Flexe and other B2B gig economy businesses may offer distributors new opportunities for selling their capabilities or services that distributors can use to improve productivity.
Even better, distributors may create their platform business models as an alternative to the traditional way of doing business. Any way you look at it, distributors will be better off in the virtual world if they explore and nurture options. Distributors have never embraced a single manufacturer on the back end of their business, so why would they participate in only a single virtual marketplace or platform business on the front end?
Distribution is nearly a $6 trillion industry. The essential question we must answer is, “What is distribution’s purpose in the digital age?” If we do something smart and innovative with distribution’s future, distributors will be in a much better position to go to market with disruptors, or without them, or more likely, both. As distributors build omnichannel capabilities, it is entirely possible that participation in virtual markets will be an essential channel for distributors. Some distributors may do so selectively, others may go full throttle. But in any event, distribution — as an industry — must put forth a vision for its purpose in the digital age. Obsessively worrying about Amazon is not the right narrative.
There is a lot of work to be done to chart a new course for distribution. We will not get there if we continue to let our fixation on Amazon suck all of the oxygen out of the room. Let’s change the subject and start talking about a future on our terms.
If you need help changing the subject of your conversations, please check out my new Facing the Forces of Change® Challenge Paper. In it, you will find 25 ideas for kick-starting innovation. Each idea is based on brainstorming with distributor leaders. I’ve had more conversations since the challenge paper was published, and I have more ideas for you to consider. I can fill an hour (or a day) with creative and new distribution-centric conversations about the future. If you need more, reach out to me at email@example.com.
And, if you’d like to receive updates related to the next Facing the Forces of Change® study, which will be published in November 2019, complete and submit this form and we’ll keep you in the loop.