As Amazon moves further into food retail, distributors should critically evaluate their competitive advantage - not only evaluating business results, but the entire business model. Lest Amazon be their foe.
Perhaps that sounds a bit far fetched. After all, distributors have always been and will always be part of the meat supply chain...right? Sysco, US Foods, and PFG compete as broadline distributors. Companies like Colorado Boxed Beef and Sherwood Foods compete as specialists in animal protein.
But food distribution is on the brink of disruption - distributors should stop focusing on their traditional competitors and start establishing a competitive advantage against the competitor no one wants, Amazon.
Let’s look at the role of distributors, the core competencies of Amazon, and imagine how (if?) the two can coexist in the Amazon era of meat.
Both broadline and specialized protein distributors play the intermediary role of getting product to customers that are either too small for a processor to deal with directly, or have some specialized business need.
Most distributors believe their competitive advantage is tied to their ability to source product “right” and in their vast logistics networks. Many will say they might make a couple of pennies on meat, but there are nickels and dimes to be made arbitraging freight.
It’s a great model that greases the wheels of the supply chain to keep meat moving between all suppliers and customers, from behemoth packers to mom & pop restaurants. Its been a great model for decades.
But has this model run its course?
Amazon has made extraordinary logistics capability core to their entire value proposition. To be sure, distributors are unlikely to “out logistics” Amazon.
As an Amazon prime member, I can order 40 items or 2 items and they’ll show up on my doorstep within 48 hours….shipping cost free. Those facts hold true for people from urban Dallas to rural Arizona and everywhere in between.
Now let’s say I run a mom & pop restaurant in Cleveland. I can purchase ingredients from a Sysco or a small regional distributor and pay more per item plus have higher cash outlays because of high minimum volume requirements for the distributor to drop items.
Or….I can sign up for Amazon Prime.
And get the right amount of product delivered at the right time….at the really right freight charge.
You may have heard examples of this happening already with dry goods, but what happens when Amazon figures out the meat supply chain and starts competing directly with distributors?
That’s a precarious position if you’re a distributor...now what’s your defensible advantage?
So how can distributors prepare for this giant of a competitor? Here are 3 ideas:
- Get out of the week to week street battle by creating more value for your customers. Add value in a way that Amazon cannot reasonably replicate. How can you help your customers optimize their business?
- Refine operations with data based decision making - stop making purchases and setting prices based on intuition. Find tools that allow you to bring quantitative rigor to decision making processes to optimize your business. (Bezos is pushing his team to do this better every day...are you?)
- Read Amazon’s annual report. Do you describe your competitive advantage the same way Jeff Bezos describes Amazon’s? If so, maybe it’s time to find a competitive advantage that isn’t shared by one of the largest distributors on the planet.
How do you anticipate the role of a distributor to change in the Amazon era of meat?
This article was originally published on Meatingplace.