The Amazon Effect—Driving Ever‐Increasing Customer Expectations

Many manufacturers and wholesale distributors have been profoundly impacted by the Amazon Effect, even if they don’t compete directly with Amazon. “The Amazon effect” refers to Amazon’s influence, dramatically raising customer expectations for things like: 

• Frictionless commerce (epitomized by Amazon’s 1‐click checkout and Amazon Go)
• Extremely fast, low cost, or free delivery, with precise real‐time tracking and easy returns
• Nearly infinite selection; breadth and depth of products
• Rich product search, filtering, and product information
• Meaningful reviews and ratings
• Personalization

These expectations reach beyond the retail industry. In fact, the boundaries between retailers, manufacturers, and wholesale distributors have become ever more blurred. Increasingly, manufacturers and distributors are selling directly to the end customer. For manufacturers and distributors who are not selling to the end customer, their existing customers’ expectations have also changed. Customers, whether consumers or businesses, expect to be able to view in‐depth product information, configure, order,  check status, and potentially request returns or report issues online 24/7—that is  in addition to the traditional channels of interaction. 

Furthermore, many retailers are demanding that their suppliers hold inventory and drop ship to the retailer’s customers. This forces those manufacturers to become proficient at fulfilling a large number of smaller orders consisting of just one or a few items, in addition to continuing to fulfill a small number of large bulk orders as they have traditionally done. Those two different types of order flows require completely different paradigms  for order management, warehouse management, inventory management, material handling, pick, pack, ship,  and logistic/transportation management.  

In short, running a business the ‘old fashioned way,’ is becoming increasingly untenable. To adjust to these  changing expectations, a two‐pronged strategy is required: 1) differentiate and 2) optimize.