Amazon has been the elephant in the distribution room for the past half decade, and there comes a point when you should ask if you might benefit from making the move to sell on there. With a significant opportunity to drive more revenue, the process of selling on these comes at a cost—a lot more work to manage the transactions. That said, if you’re going to want to make the move, you’re going to need to understand some of the challenges you’ll face on the road to selling on a marketplace.
The Marketplace Model: Lucrative, but Challenging
The ecommerce model was pushed into the future last year. Driven by lockdowns and fear of going outside, many companies found themselves facing limitations in traditional sales. Retailers still are dealing with capacity concerns in much of the country, distributors have found non-local players encroaching on their turf, and both have seen marketplaces like Amazon, eBay, and Alibaba beating them at every turn.
But distributors especially have seen Amazon take over their industry, moving into the top five on the industrial distributor list and still looking for more. Paired with the opportunity to grab a bigger piece of the action—roughly half are online—and you may find opportunity to succeed by avoiding the fight against Amazon.
Knowing this, the path to a marketplace initiative isn’t easy, and once you do make the move, you’re going to find yourself with a lot more work to go alongside the increased revenue.
Avoiding the Death by a Thousand Cuts Problem
When moving from life as a pure play distributor to a marketplace maven, you’re going to need to understand that you’ll be looking at a lot of new transactions. Individuals or small businesses might not need your traditional order loads, and you’ll need to prepare for this. Though it may seem daunting, 50,000 transactions for 100 pieces is going to bring you more money than 100 transactions for 5,000 pieces.
However, this will require your people to look through a lot more invoices—or dig through a massive remittance from Amazon to find out if something went wrong. In fact, this is one of the three significant problems that our customer JAM Paper and Envelope faced in their push to sell on Amazon and others.
Before working with us, they were excited to sell on a variety of marketplaces—only to find that their systems weren’t ready for it. Initially using MAS 90, they found three significant problems stood in their way:
- JAM was sending tens of thousands of invoices each month, entering and processing each invoice manually.
- Amazon sent JAM a remittance that the company had to manually analyze in order to match the invoice to the remittance. Remittances included both structured and unstructured deductions for everything from storage fees to shipping fees.
- When something went wrong (i.e. an unauthorized deduction), JAM faced the challenge of proving what was wrong. With a limited staff, they ended up 45 to 90 days behind in reporting.
The Secret Sauce for Marketplace Success Lies in Automation
Luckily, when they did turn to us, we built them a solution to help. First, we developed a solution that allowed JAM to automatically import invoices into the solution, saving hundreds of hours. Additionally, we built a new product to handle payments from online marketplaces.
Our product, Online Marketplace Fee Accounting and Payment Reconciliation for NetSuite, is designed to automatically apply payments from marketplaces, record both structured and unstructured fees, mark invoices as paid, and generate a deposit record in NetSuite.
Thanks to this product, the company was able to increase the timeliness of their processing and give their highly paid finance staff more meaningful work—JAM now only needs to rely on one accounts receivable person to process payments from over 30,000 monthly invoices.
In turn, payments are processed and reconciliations are completed in hours—not months—without user intervention in NetSuite. If JAM receives a payment tonight, it will be recorded and ready for analysis tomorrow morning.
Even more, the data generated by Online Marketplace Fee Accounting and Payment Reconciliation for NetSuite isn’t just processed, it’s useful. Thanks to this solution, JAM is able to process and facilitate clawbacks for unauthorized deductions. This allows JAM to recoup money they either didn’t know they were losing or were unable to recover.
View the full case study here.
Business Intelligence, ERP, and More: Address Weaknesses before Tackling Threats
Online Marketplace Fee Accounting and Payment Reconciliation for NetSuite is designed to automatically apply payments from marketplaces, record both structured and unstructured fees, mark invoices as paid, and generate a deposit record in NetSuite.
This solution delivers speed and accuracy, provides your people with visibility, and helps you run more smoothly. In fact, we helped JAM Paper get out of the bind they were in.
At MIBAR, we help firms like yours to implement and operate the right technologies to grow their business, control their data, and ultimately do more with less. ERP, CRM, Business Intelligence, and more, we have experience and expertise in the Distribution Industry, and would love to help you as well. Get to know more about our work and contact us for a free consultation.
Additional Distribution Resources
How the Largest Players Continue to Reshape Distribution
How Distributors Can Develop Resilience in a Changing Landscape
Regardless of Scenario, Cash Flow is Key: How Distributors Can Step Up AR
