Let's be honest. If you look at most companies’ strategies to protect margins and market share being eroded by Amazon, the operative description would be “Defensive.” Over the last few months, Competitive Insights and the lharrington group have been researching what specific actions will help companies develop winning strategies in dealing with Amazon. The outcome is a three-part white paper entitled Tackling the “Amazon Effect”—Time for Offensive Strategies. Three key takeaways have been identified:
- Well beyond Retail. All industries have the potential to be seriously impacted by Amazon. Wholesalers, Distributors, Third Party Logistics (3PL) Service Providers, and Manufacturers must stop playing defense and go on the offense. Offensive strategies that are based on knowing where you make and lose money for every product, customer and channel combination. Competitve actions that reinvent customer service options, targeted product offerings and intelligent pricing models that take into account the full impact of discounts, promotions, and product returns. Continuing to build traditional competitive strategies using standard P&L levels of detail will result in market displacement. Plainly put, you can’t beat Amazon playing defense.
- To win against Amazon it is imperative to adopt a competitive ecosystem that is built on three tenets:
- Rapid access to precise and specific profit performance insights by product, customer, and channel.
- Utilization of this information to create strategies that break traditional siloed decision making through collaborative, cross-functional decisions.
- Setting organizational expectations that that this type of information is the foundation for consistently creating winning competitive strategies, even as business conditions change.
- To gain maximum advantage, each industry must use these actionable insights to drive and protect their sustainable ability to generate profits. Examples:
- Retailers introducing value-adding services that drive consumer purchasing of profitable product portfolios.
- Wholesalers & Distributors understanding the true profit contributions of each delivery location and the specific profit performance of the products that each customer is buying.
- Manufacturers using profit performance insights to intelligently make informed decisions regarding product variations by channel and customer category.
- 3PLs increasing customer loyalty and retention by providing innovative value-added services, with a focus on making their operation and their customers more profitable.
The impact of Amazon has become the “bar” against which companies are being measured by their customers, either directly or indirectly. Companies will not survive if they continue to use functionally siloed, defensive decision-making.
Companies must decide how to compete, collborate, emulate, diverage from, merge with, and/or capitalize on the Amazon Effect. They must be able to quickly and effectively measure the financial impact of decisions with actionable cost and profit information. Information that is trusted throughout the organization.
The choice is simple. Go on the offense to win the game or just be another losing statistic in the rapidly changing playbook.
We would love to hear your thoughts!
All the best,