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Competing in the AmazonSupply.com Era, a Market Change for Distribution

amazonsupplyThe recent launch of AmazonSupply.com has the world of wholesale distribution asking questions about the new site’s features, functionality, and promotional offers. There are plenty of opinions about the amount of market penetration that Amazon can expect to achieve in a broad marketplace where current category leaders hold only single digit percentages.

There is also some question as to whether Amazon’s lack of a physical presence will hinder their success. Some call the site’s initial product assortment into question while others stand firm on the fact that Amazon.com sets the bar for ecommerce today and that AmazonSupply.com continue that trend.

What distributors and wholesalers really want to know is this: “Can my organization compete with AmazonSupply.com?” It’s a legitimate question. Any wholesaler or distributor who isn’t asking this question is underestimating what is probably the largest change in the wholesale and distribution marketplace since the introduction of ecommerce. However, the launch of AmazonSupply.com is not the end of a distributor’s business, but the mark of a market change. Distributors can compete and flourish alongside AmazonSupply.com, provided they take the necessary steps to solidify their position in the market.

Luke Warm Ecommerce is Not Enough

If distributors with active ecommerce initiatives in place are questioning the impact of AmazonSupply.com on their future business, those without an active ecommerce presence are also concerned with their next move. With ecommerce quickly becoming a preferred way to make purchases, companies that are not focusing on ecommerce stand to lose ground as bigger and more sophisticated Web players, like AmazonSupply.com, enter the market.

Consider the retail electronics giant, Best Buy. While Best Buy has had an ecommerce presence for some time, ecommerce has only recently taken center stage as a growth strategy. As a result, we are seeing Best Buy struggle to maintain relevance in today’s Internet-driven world. While Best Buy knew that it needed an online presence, it calculated that its customers would always prefer to make a purchase in one of its large footprint retail stores. Even as competitors Circuit City and CompUSA shuttered their businesses, Best Buy’s key play remained in their big box stores. All the while Internet-based retailers were gaining momentum as former big box customers realized that they could buy the same electronics online at lower prices and quickly receive their order without paying for shipping.

The Advantage of Being the “Little Guy”

While AmazonSupply.com has some clear advantages in the world of ecommerce— namely its sophisticated understanding of site design, intuitive user experience and vast national network of warehouses to expedite order shipping—wholesalers and distributors still have an edge over the newcomer: established B2B customer relationships, product knowledge and expertise, and a considerably wider product assortment within their vertical market. Leveraging each of these advantages will set the independent wholesaler and distributor head and shoulders above the low prices of AmazonSupply.com.

Established customer relationships are the first advantage that wholesalers and distributors have over AmazonSupply.com. Historically, personal relationships between customer and supplier have played a critical role within B2B business transactions. For many B2B organizations, personal relationships are likely to carry significant weight in deciding where to purchase supplies. In short, customers will always pay more for value.

The second advantage that wholesale distributors have over AmazonSupply.com is their comprehensive knowledge of the products they sell, how they are used and how to troubleshoot them. Wholesalers and distributors are typically experts within their individual markets whereas AmazonSupply.com is not an expert on any of the products it carries, instead specializing in transacting business online instead. The lack of expertise at AmazonSupply.com will definitely impact consumers looking for guidance and those who are not motivated purely by price will be driven to your business. Cement your position as the industry leader in your category by expanding the number of industry-related resources you offer to those who use your products.

Product assortment is another advantage that wholesalers and distributors have over AmazonSupply.com, despite their claim to offer a vast selection of products for the B2B customer to choose from. In a press release announcing the site’s launch, AmazonSupply.com is listed as having “500,000+ scientific, industrial, and business supplies” on the site. While half a million SKUs is not a figure to scoff at, the reality is that this is a relatively small number when spread across the wide variety of industries that AmazonSupply.com intends to serve. The majority of these SKUs will not be within a single vertical market and it is unlikely that AmazonSupply.com will offer every product a distributor sells. Rather, they are likely to sell only the products with the largest sales volumes to maximize revenue and inventory turnover.

This means that their offering is likely to be considered incomplete from the customer’s perspective. By offering all of the products that customers need, distributors can reinforce a one-stop-shop mentality that AmazonSupply.com will be unlikely to match.

Ultimately, the good news is that at this time AmazonSupply.com offers limited product depth within any one vertical market, offers no product or industry expertise, and has limited capability to provide ecommerce features that the B2B world has come to expect such as ability to order using negotiated pricing, established credit terms and access to order history. With strategic planning, these limitations can be wrapped into a comprehensive plan that will allow an organization to stand firm alongside AmazonSupply.com.

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