This is a part of the 2017 Distribution Trends Special Issue. The annual feature was researched and written by MDM based on interviews with dozens of distributors, industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this issue.
2017 Distribution Trends Special Issue
Amazon’s impact on e-commerce and delivery expectations in distribution is evident, but distributors and industry analysts have identified several other ways the online giant is disrupting the industry – online and off.
1. Extended credit terms: In our recent MDM market trends survey, several distributors noted that more customers are paying slower and asking for extended terms. Distributors pointed to Amazon and big-box retailers, like The Home Depot, as the cause. “If you do compete with the Amazons and others, Amazon’s got 60-day terms, so customers ask us for 60-day terms,” says Terry Snower, managing partner, Cicero Manufacturing & Supply Co. Inc., Chicago, IL. The trend became noticeable about six to eight months ago.
2. Marketplace selling: A big part of Amazon’s strength comes from its ability to get distributors and manufacturers selling through its marketplace. For small and mid-sized distributors, it’s an opportunity to expand their reach, says Alex Moazed, president and CEO, Applico, and co-author of Modern Monopolies: What It Takes to Dominate the 21st-Century Economy. But for larger distributors, it may be a major disrupter if they don’t find a similar way to compete.
“For a lot of these businesses, it is essentially going to mean that they lose a lot of business, a lot of their market cap and a lot of employees,” says Nick Johnson, head of platform, Applico, and co-author of Modern Monopolies. “… We think that a lot of these organizations can transform themselves, actually capitalize on this opportunity themselves. We don’t see any reason that Amazon should be the only winner. There’s a lot of opportunity for these distributors to build their own marketplaces.”
While many questions remain, particularly around who owns the customer for sales made through marketplaces like Amazon’s, more players are seeing it as a necessity if they want to continue building sales in today’s market.
3. Price transparency: In the past, many distributors have said they’re hesitant to make their prices visible on their websites because most of their customers have contracted prices that don’t align with those list prices. But, as noted by Grainger CEO DG MacPherson earlier this year, you’re not doing it for your existing customers; you’re doing it for potential customers. If a prospect comes to your site and doesn’t see prices, they may assume that you don’t want to show them because they’re too high. If they’re scoping you out, chances are they’re scoping out others – and Amazon is more than willing to show them exactly what they’ll pay without a contract.