How to Protect Your Business from Amazon

If you think Amazon isn’t a threat to you, think again

• By Scott Lindley
• Sep 01, 2018

If you think your dealership isn’t conducive to outside pressures, ask the merchants of Smalltown, USA, about that new Walmart going up on the outskirts of the municipality. Walmart has been like the Grimm Reaper to local business whose names have been written over storefronts of Norman Rockwell appearing downtowns, in many cases, for several generations. No more Hickey-Kent Furniture or Schulz Brothers Five and Ten. Parker’s Bakery—gone. Even the local Piggly Wigley and the A&P grocery stores closed. The town has a score of deserted store facilities while local shoppers are parked by the scores at the local behemoth out at the city limits, all searching for those lower prices and everything under one roof.

If you think Amazon is not having a similar affect, check any local shopping mall. Stop in at Circuit City or Borders Books. Death by Amazon, who is finishing off retail chain stores like Walmart glutted small businesses. Ask your friends who own a residential security businesses if they are seeing Amazon showing up in their markets. They are.

But, you argue, your security enterprise is a business-to-business (B2B) organization. You’re safe. Not true, argues Brian Beck, senior vice president of e-commerce and omni-channel strategy at Guidance, an e-commerce design and development agency, writing in Digital Commerce 360 (July 24, 2017).

“Amazon is investing heavily in enabling business buyers to purchase online using the same tools and user experiences these same buyers have become accustomed to as consumers in shopping for their personal purchases on Amazon.com,” Beck explains. “The company calls this Amazon Business and they are executing right now to digitally support traditional B2B workflows and customers’ purchasing expectations.”

Forester Research certainly supports his statement, “As of Q1 2017, almost 40 percent of B2B buyers are finishing their purchases on Amazon. In 2015, the percentage of B2B buyers that said they finished their purchases on distributor sites was 30 percent. In 2017, just two years later, that number has plummeted to 16 percent. Buyers are flocking to sites that are easy to use, fast, with broad selection, limited login requirements, and built-in trust. Amazon does these things better than anyone, and taking share from traditional channels in the process. By 2020, it’s expected that B2B buyers will make over half of their purchases online.”

As pointed out on CNBC’s “Trader Talk with Bob Pissani” (July 24, 2017), “If you don’t make the object you are selling, or don’t have some sort of intellectual property, or solve a pain point for a customer, then you’re just a middleman, and you are increasingly more vulnerable. The concern is that these middlemen will start losing volume because sales in general are going to the internet and because it’s increasingly difficult to get pricing.”

The biggest internet player is Amazon and Amazon is gearing up to get into more industries, including security. It won’t be long before some major security manufacturer sees the “wisdom” of Amazon’s business plan. As Beck preaches, “At its core, Amazon is a disruptive juggernaut that is dis-intermediating traditional sales and distribution channels.” It is only foolish to think that it won’t come the commercial security industry’s way.

Protecting Your Business from Amazon

Let’s review those points made in “Trader Talk.” Do you make the object you are selling or have some type of intellectual property? Most integrators do. In most cases, it is the software they use. Take a look at your software with cold, hard eyes. Review your competitor’s software wearing the same set of glasses. Read up on the latest business data trends, such as Big Data and the Internet of Things. Know what they mean. Where does your software fit in these major trends and how does it compete? Is it ready to handle this new data world? If it hasn’t been updated to any extent in the last five years, you could be vulnerable.

Are you a solver of pain points? Or do you simply sell hardware? Does a one type of bandage fix all wounds? If you are the latter, you are simply selling a commodity that can be replicated by anyone. Sometimes, even a computer! Become more critical in your sales strategy. Train your people to look for the real problem the customer is experiencing. Market your solution to address that situation. That’s something a computer can’t do. When in doubt, ask your manufacturer for help. They’re in this with you; they need you to be successful.

Speaking of which, how often do you ask your manufacturer to help you out? Many manufacturers have a great understanding of how to take products and services to market in today’s world. Do you have a plan on how to promote your company in your markets? How can you become the business the local media contacts whenever there is a security issue? How can you get information to provide your prospects? What about using information they have already created? Photographs? Direct mail or e-mail? Is information available and downloadable from their website? Have you checked?

Don’t forget grilling your manufacturer if they are providing ways to promote your business and make things easier. For instance, are their products interchangeable? Do long ranger readers work on the same platform as smart card readers? Do they provide OEM labeling? After all, what sense does it do you to promote them when you could be marketing your own brand? What about bids? Can they help you with specifications? On major jobs, will they send out one of their own specialists?

Do Not Underestimate the Role of Recurring Revenue

Generating recurring monthly revenue (RMR) is more important than ever in today’s world. You cannot subsist on “deals” alone. Cash flow becomes uneven and short months become painful. How can you work with your manufacturer to ensure a consistent stream of orders for new integrated features and replacement or additional product orders?

Let’s consider a simple staple, the credential card. When your customer needs another 20 proximity or smart cards, who gets the order? Somebody on the internet; somebody other than you? You should get this order but are you? It will only get crazier with the advent of mobile credentials, which 20 percent of all access control users are forecast to be using sometime during 2020. Let’s look at this subject as an example of all types of recurring monthly revenue (RMR) considerations. If you were creating the perfect internet grab, could you think of a product area much easier for Amazon than mobile credentials? They are more convenient than bringing cards to market because the user already has his credential, his smart phone, and already carries it with him wherever he goes. Credentials can be delivered to the end user in either paper or electronic form, such as via email or text. The dealer has nothing to inventory and nothing to ship. Likewise, the user sponsor has nothing to store, nothing to lose and faces no physical replacement hassles.

In addition, just like hard credentials, soft credentials can support the 26-bit Wiegand format along with custom Wiegand, ABA Track II magnetic stripe and serial data formats. They can be ordered with specific facility codes and ID numbers. They are delivered in the exact number sequence ordered with no gaps and no under- or over-runs. All this information can be set up in a handy menu, needing only a click to specify.

So, for the dealer, smart phone credentials will be more convenient, less expensive and more secure. They can be delivered in person or electronically. They are quicker to bill with nothing to inventory or to be stolen. Also, in most cases, soft credentials can be integrated into an existing access control system. Distribution can also be via independent access control software.

Here is the question that you will want to ask your manufacturer for soft credential solutions: Is your mobile credential product meant to bolster the business of your dealers and integrators or to simply provide a cheaper alternative to the end-user? In other words, are your smart phone credentials to be sold in the same manner as your traditional 125-kHz proximity or 13.56-MHz smart cards—from the existing OEM to the dealer to the end users? At both time of original order and subsequent re-order?

Assure that Your Manufacturer Isn’t Cutting You Out

If you think that you are immune from the threat of Amazon, just read these introductory words on the Amazon Business Services site: “Manufacturers and distributors who are new to Amazon or are existing Professional Sellers now have a targeted way to reach business customers on Amazon. With a full suite of tools to enable B2B ecommerce, small businesses to large enterprises will find new ways to engage professional customers in supply chain relationships. Businesses can register for a Professional Selling Account on Amazon in only a few minutes. Start selling today and reach new business customers now.”

Don’t think the some security companies—especially those with accountants at the helm—won’t seriously consider such enticements. At what percentage of your offer will their Amazon price be? How many of your customers—today—with such pricing, wouldn’t take them up on at least a portion of what you’re selling today? Would your customers be able to define the added value you bring on such orders?

Whatever your answer, you have partners in this fight. Your manufacturers, are already aware of this threat. Unite with them. Their business life is also under attack —sooner or later. Work with us.

This article originally appeared in the September 2018 issue of Security Today.