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SAP Distribution Blog

Amazon Sets Its Sights on Industrial Distribution

Posted by Gary Feldman on August 2, 2017

Over the past few years, Amazon has been encroaching more and more into the B2B space and is now "[setting] its sights on its next victim: The middleman.” A recent piece by CNBC describes how Amazon’s invasion of B2B distribution started in 2005 with its acquisition of SmallParts.com, which evolved into Amazon Supply and now Amazon Business a $1 billion e-tailer with 300,000 registered customers.

Seeking to take advantage of lower prices to lure customers away from traditional distributors, Amazon is starting to flex its muscles in a variety of B2B markets.

Companies like Grainger are embracing alternative selling models to identify value provided over straight price competition. Specifically, Grainger looked to position itself as the one-stop shopper who could reduce the cost of MRO purchasing by streamlining the purchasing process. However, with Amazon now at their door with an extremely diverse offering, their differentiation may be lost.

The article says:

“Larger companies will still want relationships with companies like Grainger because the larger customers place a higher value on receiving expertise and customer service.”

This may be true, but smaller companies tend to be more price conscious and don't have the buying power of their larger brethren with typical distributors.

So what is a smaller distributor to do? Here are several ideas:

Gain Efficiency

Get more efficient and translate the savings into lower prices and more profit in your pocket. For example, if you don't have a warehouse management system that includes bar code scanning and helps you identify slower moving inventory, make the investment now!

Get SocialAmazon aims at the middleman

Even smaller companies want relationships, and more and more buyers want to connect via social media and online methods. Amazon may have a great website and pretty darn good customer service, but they don't can't, really develop the same one-on-one relationships a small business can.

Develop Something Unique

Even distributors of relatively low-tech items can develop their intellectual property by understanding customer needs. If you're a plumbing distributor, consider making kits that have all the parts necessary for a job. If you're a flooring distributor, bundle installation and post-installation services to create higher customer satisfaction and repeat business.

For more ideas about competing against giants like Amazon, see our on-demand video here or click the link below.

Webinar Solving the Top Problems in Distribution SAP Business One

Topics: SAP Business One, Distribution

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