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By Bridget McCrea
As Amazon Business takes aim at Europe, and as Walmart shores up its presence in the B2B e-commerce arena, electrical distributors should brace themselves for more online competition during the coming year
In December, companies in Germany got the news that business-to-business (B2B) e-tailer Amazon Business had officially made its way into their country. Like its counterpart in the U.S.—which reached sales of $1 billion to 400,000 customers in the space of a year, according to OPI’s Amazon Business hits Europe—Amazon Business in Germany is offering a range of services aimed specifically at business customers.
According to OPI, Germany is Amazon’s largest market outside the U.S., with 2015 sales of almost $12 billion, so it makes sense to start the Amazon Business international rollout there. And the U.K., with 2015 sales of almost $10 billion, is “likely to see Amazon Business start up in the first quarter of 2017,” writes Andy Braithwaite.
French B2B companies aren’t waiting around for Amazon Business to make its big debut in their country (at press time, the company had yet to officially announce its expansion into other European countries). In French B2B resellers join forces to combat Amazon, Braithwaite highlights a former Staples executive’s mission to go head-to-head with the web’s 300-pound gorilla in the office supply sector. His efforts include the launch of virtual B2B marketplace “Agoply,” which brings together the product offerings of multiple B2B e-commerce resellers into a single website.
“Many of our merchants don’t want to work with Amazon, so we will have a better range of B2B products and suppliers,” the company’s co-founder told Braithwaite. “I believe our product offering will be more relevant to business customers than what Amazon will be able to offer.”
Battening Down the Hatches
As European B2B companies brace themselves for an interesting year ahead, U.S. electrical distributors should also be paying attention to what online e-tailers like Amazon Business and Walmart have been up to over the last 12 months—and what they have planned for the future. As we reported in numerous tED magazine articles, in 2015 Amazon launched a new website for business owners that expanded its existing AmazonSupply brand and provided business owners with a place to shop for all of their business needs.
From office supplies to wholesale products, the site promised to be “even bigger than AmazonSupply,” the latter of which was shuttered in May 2015. As part of its new effort, Amazon Business introduced a “Live Expert” program that allows manufacturers to connect with potential end users to answer product questions. (“That means Amazon is looking to electrical industry experts to hire as its own,” wrote magazine publisher Scott Costa, at the time of the announcement.)
Amazon Business provides purchasing solutions so that registered businesses and the people they have chosen as users, or designated associates, can shop for business supplies on Amazon. “Anyone with a business-user account can purchase via Amazon.com on behalf of his or her company or employer,” writes Jennifer Post in Amazon Business: What It Is and How It Can Benefit You. “The administrator of the main account can add and manage business-account users and features, such as payment methods and shipping addresses, approval work flows, and reporting options, depending on the needs of the business.”
Amazon Business also offers features such as business-only pricing and price breaks on multiunit purchases, Post writes, “so customers know they are getting the best possible price.” This key point—combined with Amazon’s reputation for getting the goods to their destinations quickly and for low (or no) fees—creates a unique challenge for electrical distributors that are being forced to go head-to-head with the e-tailer online. And while few would argue the value associated with the expertise, support, and service that an independent electrical distributor provides, the reality is that cost remains a crucial deciding factor when making purchase decisions.
Consider these statistics: Within five years, one-fifth of the $3.6 trillion retail market in the U.S. will have shifted online, and Amazon is on track to capture two-thirds of that share, according to a recent report from the Institute for Local Self-Reliance (ILSR). The report estimated that Amazon currently captures $1 for every $2 that Americans spend online. “Now, the e-retailer is moving towards a stake in the brick-and-mortar realm,” writes Lewis King in Air Cargo World’s Study raises concerns about Amazon’s impact on U.S. economy.
Justin King, a senior partner with B2X Partners in Ashburn, Va., and founder of ecommerceandB2B.com, tracks Amazon’s progress on the B2B front and says that the company’s most recent earnings call mentioned plans to open new warehouses and distribution centers to serve its business customers. “This means Amazon wants to get closer to those customers,” says King, who didn’t pick up on any “upbeat insights on new revenue” during the call. However, he says that his recent reviews of the Amazon Business platform itself revealed a lot more product offerings—to the tune of “thousands of products being added on a regular basis by multiple suppliers and vendors,” King notes.
In his own line of business, King says he’s having more and more conversations with manufacturers that want to know the answer to one simple question: How do we sell better on Amazon and/or Amazon Business? “Personally, I’m seeing a pretty big uptake on the vendor side; more manufacturers want to be on Amazon Business, which they see as a non-threatening way to go direct to their customers,” King explains. “They basically see Amazon as a distributor, where in reality the platform is actually a way to go direct to the customer.”
Finally, King says he’s hearing more rumblings about how Amazon Business is having “more conversations about how to connect to procurement systems” through platforms like electronic data interchange (EDI). This push on the procurement/system-to-system side of the equation could have significant impact on B2B distributors in 2017 and beyond. “I’d imagine this could at some point turn into a pretty big threat,” says King.
Walmart’s Making Strides Too
Amazon Business isn’t the only retailer that’s making strides in the online B2B space. In September, we reported on the Jet.com-Walmart marriage and its potential impact on B2B e-commerce. Dubbed by Walmart as “one of the fastest-growing and most innovative e-commerce companies in the U.S.,” Jet could help the retailer lower prices, broaden out its assortment of goods, and offer a simpler and easier shopping experience for customers.
Jet’s claim to fame is a “variable pricing model,” that finds shoppers getting lower prices when they either purchase certain items or opt out of free returns on items.
At the time of the acquisition, King cautioned electrical distributors about the development and how it—and future mergers of this kind—could impact the B2B environment. “I think we’ll see Amazon making similar moves on the B2B side very soon, with more acquisitions focused on helping the e-tailer build out its B2B community.”
As of December, it looked like Walmart was making progress on the e-commerce front. “Walmart’s chief executive, Doug McMillon, has made internet sales a priority after earlier efforts to kick-start growth fell flat,” The New York Times’ Jennifer Saba writes in Walmart Slowly Makes Strides in E-Commerce. Jet is already helping bolster Walmart’s sales, for example, with digital revenue increasing 20 percent year-over-year in the three months ended in October 2016, nearly double the 12 percent growth notched in the previous quarter, before Walmart closed the Jet deal.
Noting that Amazon stands out on ease-of-use, better shipping options, and the world’s “biggest online inventory,” and that Walmart lags Amazon in customer service in sectors like electronics, Saba sees opportunity for the former to step up to the plate and do an even better job with e-commerce during the year ahead. “With Jet’s charismatic founder now sweating such details (e.g., the lower rankings),” she writes, “Walmart’s attempt to catch up to Amazon should gather pace in 2017.”
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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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