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In The News:

3 Observations on Amazon's New Industrial Marketplace, AmazonSupply.com
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Amazon.com just announced a new online platform focused on industrial and commercial customers. With more than 500,000 products and expertise in e-commerce, AmazonSupply.com should not be discounted as a competitor in the industrial distribution space.

Amazon has been selling many of these products for quite some time now – acting as a distributor itself by selling products directly from manufacturers, as well as serving as an online platform for distributors looking to expand their reach. But AmazonSupply.com is what appears to be its first formal and most aggressive foray into the industrial distribution space.

It’s good timing for Amazon. Many of the largest MRO distributors say that their online sales have grown at a rapid clip over the past few years; what’s more, online customers tend to have a larger average order size than other customers.

Here are a few initial observations on Amazon’s new initiative:

The Opportunity  
A good number of blogs online are touting AmazonSupply as a new platform for “garage geeks.” They’re missing the point. AmazonSupply is designed to go after a B-to-B marketplace worth tens if not hundreds of billions of dollars depending on the products you include in the MRO market basket.

While I’m sure consumers will make up some of the new platform’s business, the real opportunity I see is capitalizing on what Grainger, MSC and other large MRO distributors call “unplanned spend” for MRO supplies. Grainger has put the percentage of unplanned spend for MRO as high as 75 percent of all purchases in the category. That’s a huge opportunity.

“One thing that’s unique about MRO as compared with other spend categories is that most of the purchases within MRO are unplanned, which makes it really difficult to manage. So it’s an area where customers really need the help of a strong supplier,” MSC COO Erik Gershwind told MDM Associate Editor Jenel Stelton-Holtmeier last year. (See: MDM Interview: MSC Positions for Long-Term Growth)

The Experience
From its news release, we can surmise that the focus for Amazon is on low prices, product breadth and fast shipping. That’s always been Amazon’s niche. Services or expertise in any of the 500,000+ products they are offering are not the focus here.

"We're excited to offer a wide range of items, from basic supplies like drill bits and automatic hand dryers to hard-to-find parts like laboratory centrifuges and miniature polyimide tubing, enabling business and industrial customers to streamline their buying processes," said Prentis Wilson, vice president of AmazonSupply, in the news release today.

AmazonSupply offers free 365-day returns, corporate lines of credit and a dedicated customer service center and technical help. Along with the online e-commerce site, AmazonSupply says companies can order via phone or fax. AmazonSupply also offers offer two-day free shipping on qualified orders of $50 or more, and has a guaranteed accelerated one-day shipping option, as well.

The Interface
Will an amazon.com experience work for B-to-B? It already is. Most people have bought something for their businesses at amazon.com. The company is well-known for making it very easy to buy things and get those things very quickly. And as we've said in past blogs on mdm.com, consumers' knowledge based on purchases they've made online for personal purposes does affect what they expect when they go online to purchase product for their businesses. (See: In 2010, Most Customers Expect What grainger.com Has)

This new site, targeting industrial and scientific supplies, has been customized to fit what B-to-B customers have come to expect. They didn’t mimic their consumer interface. Instead, what you see at AmazonSupply.com feels more like a grainger.com or mcmaster.com or any of the newer e-commerce sites we’re starting to see from industrial distributors.

Here’s a screenshot from the homepage:

AmazonSupply Screenshot

Amazon benefits from having a lot of experience online, which means the learning curve will be less steep than it may be for some distributors just now starting out with an e-commerce platform. Amazon knows best practices in e-commerce site design. The new website includes common features such as customer reviews and a section highlighting what other customers also viewed. It also includes a feature allowing customers to track their orders. And search engine optimization will continue to be a priority for Amazon, as well.

MDM will continue to cover the potential impact of Amazon’s latest move in industrial markets in the coming weeks and months in MDM Premium. Learn more about MDM's premium twice-monthly newsletter, which features original in-depth analysis of the wholesale distribution industry.

What do you think? What is the impact of this new initiative from Amazon? Comment below.

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