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Going Head-to-Head With Amazon: Data Gets the Dollar

In April, Amazon announced that it was moving one step closer to providing everything for business owners via Amazon Business, a new website for business owners that will expand the AmazonSupply brand and provide business owners with a place to shop for all of their business needs. From office supplies to wholesale products, Amazon Business is expected to be even bigger than AmazonSupply. As part of an ongoing series of stories looking into the future of electrical distribution, tED Magazine explores some of the key points that NAED members and suppliers should be thinking about as this online retail behemoth continues to make its way into the B2B marketplace.

By Bridget McCrea

At last count, and according to its website, Amazon Business has hundreds of millions of products, compared to the typical distributor’s 40,000 SKU offering. Could this be an advantage for manufacturers that only have to provide a certain number of product specs to IDEA? And, will it allow distributors to get their e-commerce sites set up faster and more completely than Amazon Business can? (Not to mention the fact that independent electrical distributors already have seasoned experts and technical support staff on hand to manage their customers’ needs and provide value-added services on the spot.)

For the answers to these and other data-related questions surrounding the Amazon Business announcement, tED magazine spoke with Paul Molitor, IDEA’s president and CEO. “We’re all competing for resources when it comes to getting manufacturers to provide product information that’s consistent with one or more product-coding standards,” says Molitor, who points to the UN Standard, the ETIM (European Technical Information Model), the GDSN (Global Data Synchronization Network), and a possible new EU standard as the top coding schemes currently in use. “IDEA has always used the UN standard, but there are also emerging standards plus the GDSN, which most of the retail world uses.”

Addressing Amazon’s entry into the B2B market, Molitor says the online retailer could be another possible competitor for the same programming resources. “To be honest, the manufacturers only have so many people that can help us out here,” says Molitor. “If Amazon doesn’t get onto one of these existing product standards for product coding, all they’re going to do is introduce additional cost and delay into the market. [This is] kind of funny for a company that angles toward that lowest common denominator; it could unwittingly add cost to the marketplace.”

The Everything Store
Using the book The Everything Store: Jeff Bezos and the Age of Amazon as a reference point, Molitor says that Amazon by its very nature tends to “go after ‘big everything.'” And while this may work in some marketplaces, the electrical distribution field could pose some key challenges for the online retailer. “Financially it just seems unsustainable to be able to cover the entire marketplace and provide that level of expertise across that volume of SKUs,” says Molitor, “so many of which are non-electrical.” For example, he points out that Amazon would be hard pressed to develop and/or hire the depth of expertise that today’s electrical distribution network possesses. “I just can’t see Amazon ever offering the same quality of service that the manufacturer-IDEA-distributor value chain provides,” he points out.

Molitor also acknowledges the fact that while some larger distributors have been able to develop effective e-commerce strategies, a high degree of small to midsized companies are still missing out on the opportunity. “When it comes to websites and e-commerce, it’s an ongoing battle in the industry,” says Molitor. “Everyone looks to Grainger with a sort of, ‘Wow, Grainger has it and no one else does,’ viewpoint,” says Molitor. “And while a few others have found success in the online realm, for everyone else it remains a struggle.”

Compete on Price? No Thanks
Historically, Amazon’s strategy centered on a marketplace through which products were sold online but then fulfilled by non-Amazon providers. For now at least, nothing similar exists within the electrical distribution channel, which still relies on expertise and technical support that goes beyond just clicking “place order” on a website. “If anyone [meaning, electrical distributors] opts to [participate in that], and become one of any number of multiple [suppliers] under Amazon Business, that they then have to compete with, it will be a difficult formula for success,” says Molitor. “At that point, the only thing you have to compete on is price, and that’s an absolute killer for electrical distributors.”

And besides, distributors have a major ace in the hole when it comes to the expertise, support, and technical knowledge that electrical contractors and customers need to ensure the right application for a specific piece of equipment or part. Selling books, CDs, and cologne is one thing, but selling items that impact end users’ lives (positively and negatively) in the way that electrical components do is an entirely different animal.

“I just can’t see Amazon Business getting there in terms of developing the depth of expertise that distributors have in the channel over all of the products that they propose to offer,” Molitor says, “especially if they attempt to do this at any level of volume, which is the Amazon Business model. There’s just no way that they can offer the same level of expertise that we have in the channel. No way.”

More to Come
As Molitor pointed out, there are currently a number of entities competing for the attention and resources of electrical manufacturers that are being asked to cough up the data for use across various platforms and applications. At IDEA, he says the organization is focused on the whole notion of depth, breadth, and quality of data – as opposed to simply populating fields in hopes that they are relevant, correct, and applicable. “I don’t know what the Amazon data spec looks like, but it’s probably some subset of that same information that we’re seeking to establish through IDEA,” says Molitor. “In which case the distributors have identified that as the 43 fields that we’re currently requiring as the absolute minimum of what’s necessary to conduct business.”

“If the manufacturers choose to focus on Amazon Business,” Molitor continues, “then it’s possible that those data elements may be easier for us and the rest of the channel to get. However, if it’s not the same set of 43 items that we’re looking for,  then the Amazon data set will appear incomplete compared to what we offer through the distributor’s channel.”

Looking to the future, Molitor says one additional element could impact the current data climate:  the European Union’s new attempt to establish a common data standard for product data for member companies (not just for those in the electrical field). “Apparently, Amazon is poking at the EU to try and get them to use their standard across the European countries, and that could possibly be a complicating factor,” says Molitor. “If the EU sees that as the path of least resistance to create a data standard across the European countries, that could complicate the e-commerce and data picture for the rest of us.”

McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

 

 

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