“The question is not whether AmazonSupply will be a threat,” says Richard Balaban, who has studied the site for management consulting firm Oliver Wyman. “Rather it is which customers, purchase occasions and categories will be attacked first.” ~ Forbes magazine, May 26, 2014
The goal of Amazon, in a way, has always been to become The Everything Store, the title of Businessweek senior writer Brad Stone’s 2013 book about the company and its founder, Jeff Bezos.
But does “everything” include the world of industrial supplies? That was one question Stone attempted to answer, with the help of knowledgeable insiders and the audience, at the NAW 2015 Executive Summit on Wednesday.
Amazon was first known as an online seller of books, then of retail, then of devices like the Kindle. Since then, it’s also become a producer of Golden Globe-winning television, tried its hand at a phone (and, so far, has failed), and has its hand in same-day delivery, grocery delivery, drones, and more. The company relies on UPS and FedEx to a large degree to fulfill its promise of order fulfillment, yet it is also a potential threat to those companies. Amazon has become a force in cloud-based Web hosting, and on Wednesday launched a business e-mail and calendar offering through Amazon Web Services.
All along, the unifying factor is its ruthlessness in cutting the costs paid by customers. Anyone in the way — Hachette, say — can expect to price pressures. And if you’re potentially a competitor — Zappos, Diapers.com — you’ll probably be bought.
Amazon is so focused on serving the customer — and its own interests often line up with the customer’s, Stone notes — that it famously has cycles where quarterly earnings are eschewed in favor of massive reinvestment, often on ventures that have no guarantee of panning out. For a publicly traded company, this is a rare and blatant refusal to play the game the way investors would like it.
Where does AmazonSupply fit into this?
Take all of that knowledge, plus the background Stone provided in his book and on Wednesday, and it’s not surprising that Amazon’s beta site for industrial supplies, AmazonSupply, has been closely watched by the distribution industry and media alike. Amazon’s scale, cost pressures, breadth of product availability, and brand recognition, particularly among the burgeoning millennial generation, combine to make AmazonSupply a threat with incredible potential.
But “potential” is the key word, Stone said, and this appeared to be the sentiment of the industry insiders he talked with ahead of his presentation, as well as audience members who asked questions of Stone on Wednesday. After all, the site is still in beta despite more than 2 million SKUs (stock keeping units), and it’s not like there aren’t distributors with an e-commerce presence — W.W. Grainger and MSC Industrial Direct are two prominent examples.
There’s also the question of whether the site is the right fit. Stone noted how, in his research as an industry outsider, he found the site to have promise, particularly in the UI experience. However, industry insiders and audience members felt the site is confusing and poorly designed for their needs.
There’s also the question on Amazon’s commitment to AmazonSupply — or rather, Jeff Bezos’ commitment. One commenter went so far as to suggest. based on research and insight he had seen, that AmazonSupply.com wouldn’t even exist as a standalone site in three years. This person noted how there is no longer a link on the site’s home page to the “Careers” page of job listings. Here’s that page in January 2014, with the “Careers” link, and in January 2015 without it.
Bezos has rarely said anything about AmazonSupply, and there’s no indication that his personal influence, or “eye of Sauron” in Stone’s words, has been felt there. Today’s earnings results, if they include a mention of AmazonSupply, would be a departure from recent quarters.
That said, Stone argues, it’s unrealistic to think Amazon would exit such a lucrative space such as industrial supply, particularly when it has what Oliver Wyman has called long-term advantages of price and costs, in addition to a generation of shoppers familiar with the Amazon buying experience. Even if AmazonSupply.com is folded into Amazon, that would simply be a change of details, not of the mission.
What should distributors do?
Regardless of whether AmazonSupply is the killer threat, it’s clear that distributors have much they can act on in the e-commerce space. The most basic of these steps, according to Stone, include:
- Embrace Web and omnichannel opportunities.
- Value the customer experience and the desire for flexibility.
- Be the best if you can’t be the cheapest — emphasize quality, service and response.
James daSilva is a senior editor at SmartBrief and manages SmartBlog on Leadership. He edits SmartBrief’s newsletters on leadership and entrepreneurship, among others. Before joining SmartBrief, he was copy desk chief at a daily newspaper in New York. You can find him on Twitter discussing leadership and management issues @SBLeaders
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