With Amazon and Walmart entering the market, will the DTB market become a new blue ocean for sellers?

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Walmart recently announced the launch of Walmart Business, an e-commerce platform for small and medium-sized enterprises and non-profit organizations, which is what we often call a B2B or enterprise purchasing platform. In a more fashionable way, it is a DTB platform.

As the largest retailer in the United States, Walmart is considered to be the giant that is most likely to pose a threat to Amazon in the e-commerce field and has great development potential. What are the considerations behind Walmart's launch of the B2B platform? What impact will it have on sellers?

According to Walmart, Walmart Business is customized according to the needs of small and medium-sized enterprises (SMBs) and non-profit organizations, and will provide more benefits for their purchases.

Eight years after Amazon launched its Amazon Business purchasing program, Walmart officially launched Walmart Business to attract more corporate users. This move aims to provide a one-stop service for office supplies, furniture, food and electronics. Walmart also launched a corporate membership program, Walmart Business, with an annual fee of $98. Additional benefits are available, and all orders are shipped free of charge.

In the view of more market analysts, Walmart's vigorous promotion of B2B is a sign that the chain retail giant is further challenging e-commerce giant Amazon, trying to shake its dominance in online retail, while also defending its throne as the king of offline retail.

According to relevant media reports, the Walmart business platform will be open to third-party sellers later this year.

Some Wall Street analysts said that although Walmart is huge, it is also facing the dilemma of slow growth. Amazon's market share has achieved rapid growth in the past few years, especially during the epidemic, and is constantly approaching Walmart. Finding new market demand and growth points is a key issue facing Walmart.

Previously, Walmart had been lacking in online B2B platforms, and the launch of Walmart Business is also an initiative of Walmart to improve its online business. Ashley Hubka, senior vice president and general manager of the program, said that Walmart Business will enable the company to attract new corporate shoppers and gain a higher market share.

The development potential of the online B2B market may be one of the reasons why Walmart chose to enter the online B2B track.

As the world gradually recovers from the impact of the epidemic, small and medium-sized enterprises are recovering in an all-round way, and the demand for corporate procurement will further increase. In addition, the industry reshuffle caused by the epidemic has led to the emergence of a large number of start-ups. Walmart's launch of the B2B platform at this time also happens to be able to seize this wave of growth dividends.

First of all, we have to say that Walmart is performing better and better. Although its online sales are still far behind Amazon, according to Bloomberg Finance, the proportion of middle-class families in the United States with an income of more than US$150,000 (about 1 million RMB) who have become Walmart + members has climbed from 13% in 2020 to 28% in February this year (Amazon is 77%).

Walmart has begun to be favored by the American middle class. The main reasons for the growth of Walmart W+ are, first, the low annual fee, Walmart's annual fee is ￥98, which is ￥41/year lower than Amazon; like Amazon, it has free delivery service for members; it has launched more practical gas discounts than Amazon; and it has jointly launched an online free viewing service similar to Amazon Prime Video with Paramount Film Company; and of course, the most important thing is that it is connected with Walmart Amazon offline supermarkets across the United States, so customers can directly see the products of the Walmart supermarket closest to them.

But I think that as Chinese sellers, we should be relatively calm, because the vast majority of goods purchased by American middle-class families at Walmart are goods and food from Walmart's offline supermarkets, which are very different from the products uploaded by everyone.

Which sellers will get bonuses from Walmart?

We can see that the Walmart orders of our students are growing rapidly. Some students' orders have exceeded 18,000 US dollars on average, and the best ones have exceeded 20,000. However, the premise of placing an order is to upload a large number of vertical category SKUs on Walmart, and immediately send large quantities to the W+ warehouse, and open multiple Walmart accounts at the same time.

We can see that Walmart is uploading the same number of products, many of which are naturally ordered, and the key products are ordered through advertising. Therefore, compared with Amazon, Walmart also needs to distribute products in vertical categories, but the advertising costs are lower. At the same time, W+ does not have as strict restrictions on warehouses as Amazon. Most products can be smoothly stored, and the storage costs are even lower than that of Amazon.

In the online B2B field, Walmart's competitor Amazon has already started its layout early on.

When it comes to B2B e-commerce platforms, many people will think of Alibaba International Station. In fact, Walmart Business’s model is more like Amazon Business.

In terms of business model, the buyers of Alibaba International Station are mainly distributors, who will resell to end users after completing the purchase. Amazon Business and Walmart Business are directly aimed at end-users, and this model is also called DTB by Amazon.

So far, Amazon Business has opened nine sites, including North America, Europe, Japan and other regions. It covers four vertical fields: medical institutions, government agencies, educational institutions, and commercial users, reaching more than 5 million corporate and institutional buyers. Taking the United States as an example, sellers of Amazon Business can access high-quality customer resources that are difficult to access at ordinary times, including 90% of the top 100 educational institutions in the United States, 80% of the top 100 Fortune companies, 92 of the top 100 hospitals in the United States, and local governments.

For cross-border sellers, DTB is also a market worthy of attention.

Generally speaking, corporate procurement can be divided into strategic procurement related to production and long-tail procurement that is not directly related to production. Strategic procurement products are often raw materials and tools required for corporate production. When purchasing such products, companies are often more sensitive to price, and the suppliers of the products are relatively stable, and the online penetration rate is not high. However, long-tail procurement often involves more complex categories and more suppliers. Companies are relatively less sensitive to the prices of such products, and the online potential is relatively large.

The main market that the DTB model is currently targeting is the long-tail procurement of enterprises . At present, the products in the DTB market are mainly concentrated in categories such as office supplies, school supplies, commercial furniture, and commercial IT. In addition, hotel supplies are also a relatively promising sub-category.

In the past two years, due to factors such as inflation and the conflict between Russia and Ukraine, consumer demand in Europe and the United States has continued to be sluggish. Forecasts from multiple institutions show that there is room for growth in the C-end market of cross-border e-commerce this year. The epidemic in the past few years has also accelerated the penetration rate of online procurement by overseas companies.

In the past, due to channel reasons, it was difficult for ordinary sellers to directly reach these corporate users. However, with the rise of DTB platforms and models, sellers of related products have the opportunity to reach these small and medium-sized enterprises.

Unlike the C-end, in DTB, the influence of brands is not that high. Instead, corporate procurement pays more attention to product quality, supply stability, etc. This is more advantageous for factory-type sellers with weaker brand power but product advantages. On the other hand, companies that have established a firm foothold in the C-end and accumulated a certain reputation can also expand their business to the B-end market through DTB.

Is the DTB market a new blue ocean for sellers? In Xiaoma's opinion, DTB provides sellers with a new direction to go global, but this track also has a high threshold. DTB may be more suitable for sellers with supply chain advantages or high-quality products but weak brand power.

As the DTB market grows and develops, a group of new giant brands may emerge in this field in the future.