Whenever a rock this big gets thrown into the electrical pond, the ripples reach all distributors, manufacturers and reps.
Amazon's recent announcement that its new AmazonSupply business would offer industrial and business customers quick-click access to 500,000 MRO (maintenance, repair and operations) products is sparking plenty of discussion in the electrical business, as well as in many other MRO-oriented distribution niches that live along the same shores of the distribution industry.
The shipping cartons they truck from their warehouse shelves to customers through Industrial America usually differ quite a bit from what you see on the loading docks of an electrical distributor. But when the $48 billion king of online sales drops into your pond, everyone gets wet. While the current selection of electrical products on www.amazonsupply.com is relatively sparse, at press-time it had grown in just two weeks and included products from some blue-chip electrical manufacturers with well-established relationships with electrical distributors.
While researching Amazon.com's move, I discovered some interesting nuggets that have some quirky correlations to the situation at hand. For instance, did you know that the famed Amazon River in South America got its name when Spanish explorer Francisco Pizarro was completing the first known navigation of the famed 3,976-mile-long river, and he claimed he was attacked by Amazons — the female warriors from mythology? I am not saying distributors will be battling anything like these mighty warriors with AmazonSupply , but they will see some new competition for sales from those customers who prefer to do their purchasing online (read younger Gen X-types and others who grew up on computers).
Nugget #2 is that Amazon founder Jeff Bezos originally wanted to call his company “Cadabra” (as in, “Abra-Cadabra, I am going to cast a spell on you”), but realized that it sounded like “cadaver.” He reportedly chose Amazon as a name in part because it would represent the vast selection of books he intended to sell online.
It's quite clear what Amazon has done to the book stores since selling its first book online in 1995, but I don't think anyone really expects the company to have anywhere near the same vast impact on the distribution world, in large part because the costs of warehousing and shipping much heavier, awkwardly-size electrical products are much greater, and the profit margins for electrical products have got to be quite a bit lower than in the book business.
To some degree, I feel like I have seen this movie before during the dot-com era, when now-defunct companies like www.equalfooting.com, totalmro.com and www.purchasingcenter.com had similar big ideas about going direct to end users. However, it will be very interesting to see if AmazonSupply will go after national, multi-vertical MRO contracts. And they can make some in-roads with those customers where it's all about price and not about local warehousing, expertise and local relationships.
I also would like to see how they do against Grainger, which does zillions of dollars of MRO business on www.grainger.com and still seems light-years ahead of every other distributor with online sales and marketing. And it will be interesting to see how they do against Fastenal Inc., Winona, Min., which is much more MRO-oriented than many electrical distributors.
I don't see AmazonSupply having much immediate impact on the day-to-day electrical contractor business, where customers want a job's worth of supplies on the same pallet delivered within 24 hours to a job-site, or available for pick-up at a local branch. The billion-dollar question is if electrical contractors will really prefer to buy their products from AmazonSupply just because it has an online store and offers two-day shipping for eligible orders $50 or more and free returns. Online sales still account for a surprisingly small amount of sales for most distributors. The major ERP systems offer online storefronts, but few distributors have used them to differentiate themselves from competitors, with the exception of www.grainger.com.
Amazon's move into this pond is an interesting development. But I don't think any distributors will get wet unless Amazon figures out how to revolutionize the purchasing equation or distributors lose focus on their key advantages — local stock, timely delivery, credit and product expertise. If they do that, they could get swamped by AmazonSupply.