As you know, Amazon recently finalized its $13.7 billion acquisition of grocery giant Whole Foods, marking the company’s long-anticipated leap into brick-and-mortar. The deal has caused retailers in the $800 billion grocery industry to wonder what this means for their current and future go-to-market strategies. But grocers aren’t the only people who should be paying attention to these developments. Amazon’s moves could have far-reaching consequences for any company with storefronts – especially manufacturers with dealer locations.
Amazon has long wanted to gain a bigger stake in the aftermarket parts space, culminating in its rollout of Amazon Automotive – its standalone product category aimed at providing do it yourselfers (DIYers) with everything from tools to specialized replacement parts. The DIY automotive aftermarket space is currently worth $50 billion. And as Amazon expands to brick-and-mortar, more traditional dealer service centers will have to rethink their business strategies if they want to compete.
With this in mind, here are three areas that manufacturers with dealer networks should pay attention to if they want to drive results in the “Amazon brick-and-mortar” era.
Pricing is pivotal
For many of today’s shoppers, price is already a crucial factor that helps them decide when and where to make a purchase. In fact, 90% of shoppers say that price is the foremost reason why they switch from one brand to another. Amazon’s incredible resources have helped it dominate many verticals based on price alone – see their price reduction at Whole Foods. Therefore, traditional OEMs and dealers – everyone ranging from automotive to heavy equipment and appliances – will have to take a look at the best way to modernize their service parts pricing processes.
Service parts pricing has long been a revenue generator for manufacturers, but the time has come to optimize the process to gain even more revenue, and margins, from more efficient after-sales service operations. Service parts pricing shouldn’t be a static figure that only shifts based on outdated processes like cost-plus logic and Excel spreadsheets. Pricing is a science, and manufacturers need to embrace modern technology that lets them approach pricing as such. Sophisticated service parts pricing technology allows companies to proactively price parts based on a host of market conditions, customer feedback and previous customer experiences. This ensures that stock is moved at the right price so they remain as competitive as possible.
Inventory management must be streamlined
Amazon is a logistics juggernaut. The company has an enormous network of distribution centers, shipping perks through Prime and seemingly infinite access to inventory. So to combat this and improve efficiency, OEMs with dealer networks have to adopt service parts inventory management solutions to minimize carrying costs, forecast the outcomes of inventory strategy shifts and eliminate as many manual processes as possible.
Sophisticated service parts management tools allow dealers to deliver a better customer experience while minimizing carrying costs, shipping inventory with greater specificity based on real-time insights to make sure the correct quantity is always in the right place. This is important since 47% of customers say they “would take their business to a competitor within a day of experiencing poor customer service.” Also, with the cost of customers switching to competitors estimated to be $1.6 trillion in 2016, it’s never been more important to keep them happy, especially as Amazon ramps up its offline business.
Analytics & data need to be forefront
As a company the size of Amazon enters the brick-and-mortar landscape, it’s more important than ever for manufacturers to have a full view of their operations. This will help them make decisions within a competitive timeframe, and ensure that any insights aren’t being missed. A comprehensive big data infrastructure does just that, and can help businesses tackle everything from managing product returns to staying up-to-date with distribution issues.
By the end of 2020, big data is set to be worth more than $203 billion, meaning data management will be a fixture in business for a long time. Companies that have been slow to adopt more advanced data and analytics capabilities will need to change their approach if they want to compete with Amazon, as well as traditional competitors that have already become more data savvy as they look to battle with Amazon’s vast omnichannel data resources.