Is Amazon the Next Big Thing in Distribution?
Is Amazon the Next Big Thing in Distribution?
Amphenol Industrial Global Operations has announced that it now offers a variety of its products on AmazonSupply.com. Amphenol is the first connector company to sell its products through the online store. The on-line offering includes products from 10 of Amphenol’s series, including Amphenol’s 97 Series, 5015, 26482 – Series 1, Amphe-Lite, Amphe-PD, Helios H4 Connectors, HelioLug, PowerLink, RPT, and SurLok. The products are used throughout nine of Amphenol’s key markets, including machine tool, medical, motor control, power distribution, solar, test and measurement, traffic control, welding and geophysical.
Martin Booker, general manager of Amphenol Industrial Global Operations, said, “Working with AmazonSupply.com enables us to get our products into the hands of customers quickly, efficiently, and hassle-free. There is no better way for us to get our products in front of users worldwide than through the Amazon name customers have come to trust. Amazon Supply makes it simple for our customers to shop with just a click of a mouse.” Amazon.com launched AmazonSupply.com on April 23 of this year. The launch marked their first foray into the business-to-business (B2B) sales arena. The introduction has signaled an increasingly noticeable shift for the retailer from targeting individual consumers to appealing to business owners and managers.
AmazonSupply.com sells all types of common business needs. From janitorial and sanitation supplies to basic office products like staplers and paper, the company sells more than a half million products on its site.
Amazon’s press release describes AmazonSupply.com as “a new website dedicated to offering a broad selection of parts and supplies to business, industrial, scientific, and commercial customers at competitive prices.” According to the press release, Amazon Supply “currently offers more than 500,000 items from leading brands” across a range of categories, including: lab and scientific, test, measure and inspect, occupational health and safety, janitorial and sanitation, office, fleet and vehicle maintenance, power and hand tools, cutting tools, abrasives and finishing, materials handling, materials (e.g., metals), hydraulics pneumatics and plumbing, fasteners, and power transmission.
Shipping costs are clearly bundled into total costs as “eligible orders of $50 or more receive free two-day shipping.” Moreover, it appears that Amazon has cloned – and potentially improved — its B2B customer service experience providing, in their words, “free 365 day returns” and a “dedicated customer service center.”
One question that immediately comes to mind is what the reaction of both main line and catalog distributors will be. The greatest issue and fear for the distribution industry in the 1990s was disintermediation. Would logistics suppliers such as UPS or FedEx move into the distributor’s space and allow customers to order directly from manufacturers but still enjoy the benefits provided by distribution’s supply chain management expertise? Would these same logistics suppliers establish auto-replenishment and VMI programs, which would add another layer of service to their offering and further distance distributors from their customer base?
In hindsight, neither threat materialized to a significant degree. Customers appreciated the kitting, staging, and line-card management services that the distributors provided. None of these services were available from the logistics providers. In the final analysis, neither UPS nor FedEx was willing to open cartons, and they were unable to provide the desired levels of service without doing so.
What, then, is the potential threat from Amazon Supply? It is certainly not going to have an impact on high-volume business. But will it encroach on the pre-production, engineering samples, and MRO business currently supported by catalog distributors? The answer for the short term is “probably not.” For starters, there are too few electronic components on the site. Amphenol is the first, and for now the only, main line component supplier with a presence. Based on recent conversations, none of the other major connector suppliers are considering Amazon at this time. Until the site’s offering reaches a critical mass of components, it will be hard to attract potential customers who are accustomed to one-stop shopping for both connectors and other components.
Finding Parts is a Challenge
One issue that both AmazonSupply.com and Amphenol will have to remedy is the ability to find parts on the site. There are currently 14 product categories listed on the home page. The only two that might potentially include electronic components are “Lab & Scientific” or “Test, Measure & Inspect,” but there are no electronic components listed under either one. The product index does include a category for electronic components, with a subcategory for interconnects. Unfortunately, there are no Amphenol products listed in either section. The only way to find the Amphenol products is to either enter “Amphenol” in the search field or to choose “Amphenol – Electronic Components” from the brand index. Hopefully, Amphenol will work to quickly improve this situation. A quick check of the Amphenol website failed to turn up a link to Amazon. The only mention of the new relationship is in a copy of the press release posted in the news section of the Industrial Products site.
Will it Work?
Although Amazon may technically have the reputation and name association to expand to the supply business, that doesn’t necessarily mean that business owners will flock to the new AmazonSupply.com site for industrial supply needs. Regardless of price and apparent ease of use, business owners are accustomed to personalized service from customer service representatives. Technical information, part selection guidance, and cross-reference capability will not, at least for the foreseeable future, be available from Amazon.
It will also take some time for customers to recognize Amazon Supply as a source for the products they require. There are many other sources for everything that is available on the site. These incumbent suppliers include industrial supply distributors like Grainger and McMaster Carr as well as retailers like Staples and OfficeMax. One significant differentiator is that all of the competitors have strong online presences as well as established brick-and-mortar locations.
A recent article on the “Business 2 Community” website asserts, “Many businesses have taken strides to cut out the middlemen, allocate multiple responsibilities to individual employees, and increase profit margins. The introduction of Amazon Supply seems to be in line with those ambitions, although it’s unlikely that the new branch of the online conglomerate will have a significant impact on industry competition.”
The article concludes, “Although many businesses are scrambling to be at the front of the technological curve, behind the scenes, business owners know that customer service will always be king — and they expect it for themselves. Although some business owners will undoubtedly use Amazon Supply for some basic purchases, the new website is unlikely to have a profound effect on big industry competition.”
I wonder if executives at Borders had the same lack of concern when Amazon.com entered the retail book market?.But so much has changed since then. Borders had no website at the time. BarnesandNoble.com did not launch until two years later. Today’s competitors for all commodities have strong, well-established websites.
Another concern is the breadth of AmazonSupply.com’s product offering. Initially, Amazon sold books. Borders and Barnes & Noble sold books, providing direct competition. AmazonSupply.com, on the other hand, seems to sell everything from bakeware to pipe fittings. But is more really better? As indicated above, searching for and finding connectors is no easy task. And unlike with the electronic component distributor websites, there is no reason for a customer to assume they should be there at all. We doubt that many customers will put forth the effort necessary to find and purchase an electronic component from the site as it is currently configured. It would be wise, however, for distributors to consider Amazon as a potentially strong competitor and to monitor their progress very closely.
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