Amazonsupply.com’s intentions as an online distributor represent a real alternative to existing market channels.
Last year, amazon.com launched the company as an online distributor of all sorts of commercial and industrial products. Amazonsupply.com carries more than 600,000 MRO-type products from mop heads to reams of paper to drill bits, offers fast delivery from a growing network of warehouses and promotes lower prices than other sources of supply.
While amazonsupply.com hasn’t yet taken direct aim at the electrical market, it already carries thousands of electrical products from at least three dozen blue-chip electrical manufacturers. Just type “electrical” into the search engine at amazonsupply.com, and you will be amazed at how many electrical products the site already sells, and which manufacturers already use it.
This isn’t just another clicks-without-the-bricks scheme dreamed up by a 1990s-era entrepreneur with millions of dollars of venture capital to burn. It’s a well-thought-out foray by a company that transformed the retailing world, is investing millions in new bricks-and-mortar distribution facilities, and is currently enjoying rave reviews for its Amazon Prime service. Customers pay $79 annually to get free two-day delivery for orders over $50 . Same-day service is available in select metropolitan markets at additional cost.
Amazon.combacks up this aggressive delivery offering with a massive network of warehouses to deliver the goods. In its 2011 annual report, Amazon said it had 26.4 million square feet of “fulfillment and other” facilities (read warehouses) in North America and 17.7 million square feet internationally, and over the past year announced the construction of millions of square feet of new warehouses in California, Indiana, New Jersey and Tennessee.
Is amazonsupply.com a real threat to traditional electrical distributors? When you combine several million square feet of new warehousing capability with an expanding selection of electrical products from blue-chip electrical manufacturers with free two-day shipping and you have a very real new competitor that can peel away orders from customers who don’t see a need for the local inventory or product expertise ideally available at a distributor’s branch.
During a rep advisory council for a large electrical manufacturer that I helped facilitate last month, the subject of amazonsupply.com came up, and three of the reps there saw amazonsupply.com as a very real alternative to traditional distributors for many of the products they sell. They also said distributors need to take notice of the Amazon Prime offering of free two-day delivery, because despite what they say, customers don’t really need every order delivered immediately. If you haven’t already evaluated amazonsupply.com as a new competitor, it’s time you ask yourself some questions:
- Which of my manufacturers now use amazonsupply.com?
- Have I asked anyone on their management team or field sales force what amazonsupply.com offers that electrical distributors don’t?
- What types of customers are most likely to buy at amazonsupply.com instead of from me?
- Which types of value-added services do I offer that amazonsupply.com can’t compete with?
It’s a free market, and manufacturers can and should have complete freedom in selecting the channels to market that will most effectively sell their products. I don’t think amazonsupply.com will change the distribution market the way amazon.com changed the retail market for books, music and some other categories, because value-added services like offering 60-day credit, staging and delivering orders customized for a job-site and training on more technical products will continue to matter for many customers.
And I don’t think amazonsupply.com will do a particularly cost-effective job of delivering heavy products like conduit or reels of wire and cable. But I do believe amazonsupply.com will take away sales of price-sensitive commodity products that don’t require any training or special care and handling.