Many organizations with legacy business models may still not be ready for transformation, nor may be prepared to disrupt their own business models.

Amazon and Alibaba have achieved unprecedented growth due to their ability to streamline and optimize the business processes for their suppliers. Both these companies may have different business models, but they both have a digital platforms that creates a ‘shared economy’ model for the suppliers and resellers. Amazon FBA (Fulfillment by Amazon) accounts for almost 40% of Amazon’s profit margins, on the other hand Alibaba’s Singles day sale exceeds $25 billions.

One of the biggest challenge for any resellers or distributors is the burden of inventory, which directly impacts the stock availability. Alibaba maintains no inventory, whereas Amazon stocks inventories at its various distribution centers. However, both these companies have created a platform that allows the suppliers to upload their inventory status along with the enriched product feeds.

The future of distribution model may slowly transition similar to that of Amazon FBA model. Along with the integration of direct suppliers inventory feed from the supplier’s warehouse, distributors can reduce the burden of maintaining huge inventories while allowing the suppliers to scale. Amazon or Alibaba can potentially disrupt the distribution industry overnight by integrating supplier feeds directly into their eCommerce platform, and by leveraging their existing Supply Chain Logistics.

Can a ‘shared economy’ model disrupt the legacy distribution models?

Author: Jasbir Sandhu