Displacement is the New Disintermediation - Modern Distribution Management

Log In

Displacement is the New Disintermediation

What Amazon Business means for your company and distribution.

If you sell on the Amazon Marketplace or are thinking about it, consider the possibility that you are empowering a company that could become your fiercest competitor.

As I outline in Amazon Business: The Burning E-Platform, Amazon Business is not just a distributor — it is one of the world’s leading software and artificial intelligence companies and is likely to use these tools to improve its margins by “going direct” over time.

The company is already wielding these strengths to position itself as a great eProcurement supplier. It has developed the capability to be the primary supplier to major purchasing organizations with the third-party marketplace as its greatest asset.

In the early days of the internet, I worked in marketing at Grainger and was invited to speak to second-year MBA students at Northwestern University about how e-commerce was changing the competitive landscape. A hot topic at the time was “disintermediation” – the concept that manufacturers would no longer need distributors and would sell to their customers directly.

Students often asked me, “When is the internet going to put Grainger out of business?” I pointed out that an online ordering mechanism was a small part of what it took to sell to end customers. Distributors add value in many ways. They support customers with a much wider assortment than any single manufacturer, open account terms, fast delivery, demand generation and much more.

In my view, disintermediation was never a real threat – it’s always made sense for there to be an intermediary between manufacturers and end customers. The strategic case for distributors remains as valid as the logic for the existence of retailers.

What no one saw coming at the time was the emergence of a mega-supplier such as Amazon. Much of Amazon’s power is derived from its “third-party” marketplace, an offering available to both consumers and business customers. This breakthrough is the new enabling model for what is a superior value proposition to an increasing set of customers. Even the world’s largest retailers and distributors offer a tiny fraction of what Amazon “carries.”

Distributors and retailers who sell through Amazon’s third-party marketplace are enabling a ferocious new competitor and may be participating in their own demise.

Read much more about this topic in Amazon Business: The Burning E-Platform. Also be sure to check out my first article in the series, Amazon’s Prime Target: Your Business, which details how Amazon is coming at distribution "determined to win," and Part 2, Amazon Gets Down to Business, which looks at the origins and evolution of Amazon Business.

Share this article

About the Author
Recommended Reading
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

Get the MDM Update Newsletter

Wholesale distribution news and trends delivered right to your inbox.

Sign-up for our free newsletter and get:

  • Up-to-date news in a quick-to-read format
  • Free access to webcasts, podcasts and live events
  • Exclusive whitepapers, research and reports
  • And more!


articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to mdm.com, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events

Subscribe to continue reading

MDM Premium Subscribers get:

  • Unlimited access to MDM.com
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events



You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on mdm.com
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.

Join other distribution executives who use MDM Premium to optimize their business. Our insights and analysis help you enter the right new markets, turbocharge your sales and marketing efforts, identify business partners that help you scale, and stay ahead of your competitors.

Register for full access

By providing your email, you agree to receive announcements from us and our partners for our newsletter, events, surveys, and partner resources per MDM Terms & Conditions. You can withdraw consent at any time.

Learn More about Custom Reports

Request a Market Prospector Demo

  • This field is for validation purposes and should be left unchanged.