There has been a lot of speculation about what Amazon.com’s foray into the realm of wholesale supply means for distributors. Can we expect major disruption, along the lines of Amazon’s revolution in retail selling (which resulted in casualties such as Borders Books and Circuit City Stores)?
Most industry observers believe there is no cause for panic. Attendees at Epicor’s Insights 2012 global customer conference were heard to comment that AmazonSupply has merely “raised the bar.” That is, it has the potential to set a new standard that will push more wholesale distributors toward embracing technology as a means of reducing their overall cost to serve and enhancing their customer relationship management capabilities.
Amazon’s entry into the market may indeed become an impetus for distributors to compete using technology, as customers increasingly rely on the Internet to research and compare pricing and availability. Over time, the rise of AmazonSupply may even come to be regarded as a milestone in the validation of e-commerce.
Watch for AmazonSupply to initially go after the spot buy or “unplanned spend” part of the wholesale market, especially for commodity items that don’t require additional services. Modern Distribution Management and others have speculated that the biggest threat is to MRO distributors such as Grainger.
For most traditional distributors, product knowledge, multichannel capability, speed, accuracy, local relationships and customer service are the keys to maintaining a competitive advantage. For example, many customers of wholesale distributors rely on extended lines of credit, a service not currently offered by AmazonSupply. If Amazon does eventually introduce this option, it could further “turn up the heat” in the marketplace. In the long run, some larger distributors may even find opportunities to partner with AmazonSupply, such as for local pickup of materials. (In fact, Amazon has just announced remote pickup service, which allows customers to pick up their orders at a convenient location.)
Gartner analyst and vice president Bob Anderson advises distributors, “The train has left the station. You need to ‘get with the program.’” In other words, AmazonSupply is not going away, and distributors will need to monitor this new enterprise closely and learn to adapt their businesses accordingly.
Don’t take a “wait and see” approach. While AmazonSupply may or may not be a direct competitor for your distributorship right now, either way, it’s going to shape your customers’ expectations of how they interact with your business and others in the online world. More and more, B2B customers will come to expect the same consumer-friendly experience they get from Amazon, and technology is the key to providing that experience for your customers.