The traditional business to business retail model is dead
Title: Why the Traditional Business-to-Business Retail Model Is a Thing of the Past
In the realm of commerce, the traditional B2B (business-to-business) retail model has long held sway. This model typically involves a chain of intermediaries - manufacturers, distributors/wholesalers, retailers, and, finally, customers. Each entity in this chain aims to turn a profit, and each step adds its own margin to the product's price tag.
Take a product with a manufacturing cost of £1 as an example. The manufacturer might aim to double their money, selling it to a wholesaler for £2. The wholesaler seeks to double their investment and offers it to the retailer for £4. Consequently, the retailer must sell it at £8 to secure their profit. In this case, a product that begins with a cost of £1 is marked up a whopping 800% by the time it reaches the customer.
But the times are changing. The era when consumers had to pay hefty margins across the retail chain is coming to a close. As global competition surges and consumers wield the power to swiftly compare prices, demands for lower costs grow. Traditional retail margins are being relentlessly squeezed.
The solution? A more efficient and profitable model that eliminates the middleman. This streamlined model allows retailers to purchase directly from manufacturers, bypassing distributors or wholesalers. Similarly, wholesalers can circumvent retailers and engage directly with customers. By embracing these changes, the manufacturer's £2 product can now be sold at £4 (half the original retail price) or retaining the £8 price point, thus securing a much healthier margin. Retailers often pitch somewhere in-between these two price points which offers the consumer lower prices while simultaneously maintaining an increased margin.
The apex of this transformation lies in a manufacturer-to-customer model. However, this approach isn't without its challenges. It's rare to find a manufacturer with an in-depth understanding of the local market and the ability to craft a compelling brand story. As a result, many of these models suffer from poor branding, often associated with a sense of 'cheapness' in consumers' eyes.
Yet, the secret to this conundrum is white labelling. By white labelling products from manufacturers, you can build a brand around them, fostering a reputation that commands a premium in the market.
So, why does white labelling work so well on Amazon?
1. Avoid the Buy Box Race: White-labelled products do not have to vie for the Buy Box, avoiding the race to the bottom that erodes margins.
2. Price Control: With no other sellers offering your product, you gain full control over pricing.
3. Brand Power: Utilize the strength of your brand to stand out from the competition. This involves creating captivating brand stories, compelling lifestyle imagery, and video content.
4. Amazon's Brand Registry: Register your brand with Amazon's Brand Registry to unlock exclusive features available only to brand owners, such as A+ content.
Here’s the final kicker; Established brands, using traditional retail models, can opt for a distinct white-label brand on Amazon, preventing a scenario where they compete with their own customers!
Contact Amazency today to find out how we help our clients white label.
Reach out to Amazency today for a free consultation!