By Jack Keough
A little more than a year ago, distributors were shocked when Amazonsupply.com announced its intention to enter the business-to-business (B2B) marketplace. Now another Internet giant, Google, is running a beta site from which electrical and electronic supplies can be sold. A new, strong competitor has emerged and shouldn’t be taken lightly by distributors.
The site, Google Shopping for Suppliers, is an extension of the company’s successful Google Shopping site.
A Google spokesperson described the site and its intent to WebProNews.com: “Google Shopping for Suppliers is a beta that helps users searching for B2B products to quickly find what they’re looking for, evaluate options and connect with suppliers to make their purchases”.
The beta site actually began in early February and since that time Google has added more products. All indications are that the company will eventually roll out the site to a wide variety of industrial products.
The products currently listed on the site include circuit breakers, electrical connectors, power converters and inverters, relays, switches and wire.
Google has not released any information as to the success of its beta site thus far nor indicated how many suppliers have signed up.
The revenue model for Google is linked to a Google Verified Supplier program which requires a supplier to pay a verification fee of $1,000 and the company filling out an application. The verification process itself includes a credit check and business registration.
By becoming a verified supplier means a company gets a badge on its listing and has its products listed ahead of non-verified suppliers. The company also notes that as a Google Verified Supplier your products appear higher in the sponsored results section on Google as well.
Once a company has been verified, the supplier completes a company profile by adding a company overview, certifications and photos. Whenever a potential buyer clicks on a supplier’s products, they will see a link to the supplier’s company information.
A completed company profile gives potential buyers more information about a verified supplier and they will see a link to the firm’s information.
What should concern distributors is that a customer could just click on to a manufacturer’s web site and then order the part or product through e-commerce and eliminate the distributor altogether. Google could also eventually link product groups together through catalogs and offer e-commerce to customers.
Google’s decision to enter the B2B marketplace came only 9 months after Amazon entered the arena. Amazon launched Amazon Supply in April of 2012 and offered 14 different industrial product categories. The site offers more than 600,000 parts and products. It is too early to determine how well Amazon Supply is doing and the Washington-based company is not releasing any information regarding the venture.
Amazon already offers two-day delivery to customers whose invoice totals more than $50 and is being shipped to one address. Under Its “Prime Service” program, users pay a $79 annual fee two-day shipping no matter the cost of the invoice total.
AmazonSupply.com has become a member of several industrial trade associations and its presence has unsettled some distributors.
However, most distributors don’t see Amazon and Google as a major threat except in the case of commodity type products. And that may be to their detriment. Amazon already has 175 million users and that alone creates a staggering account base.
“Distributors are asking a big mistake in underestimating Amazon,” a Pacific Northwest industrial distributor told me. “They have the logistics in place and a strong cost alignment and will lean on shippers to even get better costs. And because of their volume they’re going to get it.” He asked that his name not be used.
Steve Epner of BSW consulting, who often speaks on technology issues at distributor trade association meetings, echoed those comments. He said that Amazon Supply and Google will become increasingly important in the distribution sector.
“If I, as a customer don’t need a commodity type product or big box stuff right away and I’m going to get fast delivery and the product at a lower cost why wouldn’t I do it?” he asked.
Distributors, he warned, should take the threat of these on-line sellers seriously and give more thought to what value added services they provide to their customers. “Value added doesn’t just mean adding value to the products but so many other things, like quick turn arounds, special terms, special stocking of inventory,” he said.
Epner also pointed out that distributors need to keep up with the changes taking place with their customers and how to effectively communicate with them.
“The Internet is not just about technology,” he said noting that the Internet should be considered today as yesterday’s “dial tone.”
Today and tomorrow’s customers will continue to be communicating electronically through the Internet, he said, especially as millenials continue to advance in the business world. Distributors should take notice, he added.
The move by these companies also creates additional pressure on independent distributors to offer e-commerce. In addition to Amazon Supply, a number of major players in the electrical/MRO sector are growing their E-commerce business. For example, more than a third of Grainger’s sales come from e-commerce and company executives predict that number will rise to 50 percent in the next few years.
And electrical/MRO distributor giant WESCO now has a virtual electrical buyers guide on its site.
Buyers are taking notice. In a recent survey, hybris, a software company specializing in e-commerce, confirms that this technology is becoming more important to end users. The study showed that 88 percent of procurement specialists prefer suppliers that offer e-commerce over those who do not.
One thing is for sure: Amazonsupply.com and Google believe they can fill an important niche in the MRO/OEM marketplace. Some estimates peg the B2B marketplace at more than $550 billion. And these Internet companies, who have built their firms around technology, clearly want a piece of that business.
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Jack Keough was the editor of Industrial Distribution magazine for more than 26 years. He often speaks at many industry events and seminars. He can be reached at john.keough@comcast.net or keoughbiz@gmail.com
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