Every weekday in December, tED magazine is counting down the Top 20 Stories of 2013. Below, the #10 story of 2013, originally posted on August 30, 2013.
By Jack Keough
Amazon is in the midst of a massive $13.9 billion warehousing and fulfillment expansion across the country that will mean the Seattle, Wash.-based company will have more than 90 warehouses in operation by the end of the year.
In fact, according to an article on Bloomberg.com, Amazon also intends to build 5 more warehouses. And they also may be looking at future locations including Washington, D.C., Florida, and Connecticut. Thousands of workers are expected to be hired.
(For a full copy of the story click here.)
What this means for its AmazonSupply.com unit is undetermined because the company has not said if some of those warehouses will be targeted specifically for industrial supplies. Right now, AmazonSupply lists offers 14 different types of industrial categories that include products ranging from materials handling, electrical, drill bills, power tools and janitorial supplies.
Amazon started AmazonSupply.com in April, 2012, as an outgrowth of Small Parts, a company which Amazon acquired seven years earlier. Small Parts initially targeted just the medical supply and research industries.
Before this current building binge by Amazon, the company reportedly could offer same-day delivery to 15 percent of the country. One study mentioned in the Bloomberg report pointed out that if fulfillment centers were built in the top major metropolitan areas in the country that number would jump to 50 percent.
The $13.9 billion number includes money spent on fulfillment expenses including building costs from some 50 warehouses constructed since 2010. These additional warehouses-if used fully or partially for industrial supplies-would also mean increased pressure on industrial and electrical distributors to compete with this e-commerce giant.
The Bloomberg article also notes that Amazon now has its warehouse building down to almost to a science. Previously it might have taken two and a half years to build one of its massive warehouses.
Here are just some examples: an Amazon warehouse in Chattanooga, Tenn., only took 10 months to complete, while in Middletown, Delaware, Amazon completed a 1.2 million square-foot warehouse in just less than that time frame, opening last October, according to the News Journal of Wilmington, Del.
And Amazon has decreased the costs of its warehousing operation through its acquisition of Kiva Systems, which designs warehouse robots, for $775 million in March of 2012.
Industrial buyers, meanwhile, seem to be using Amazon Supply as they search for new products.
One research study by the Acquity Group, a digital marketing research firm, shows that nearly half of industrial suppliers in a recent survey said they have bought products from AmazonSupply.com. Twenty-five percent of these buyers said they had bought products frequently.
The study also showed that convenience and accessibility was more important to them than the relationship with current suppliers. If another website or supplier sells the same product at a lower price, 85 percent of respondents stated they will buy the lower cost option instead, despite loyalty to their current supplier, the study showed.
Still, many distributors say they are not worried about Amazon and don’t see them as a threat, although some add they see it becoming more of a competitor to smaller, less financed distributors who do not have e-commerce capabilities.
Some experts say distributors should be more concerned.
“B2B distributors must be aware of the revenue threat from the third-party B2B e-commerce websites,” said Robert Barr, senior vice president at Acquity Group. “This is particularly important since many buyers do not visit distributors’ physical stores, but rely on catalogs and websites to research products. Unfortunately, many of these websites are outdated and lack capabilities to meet customer expectations.”
Amazon isn’t content to expand just into the into the industrial supply business. Six years ago it ventured into the e-commerce grocery business when it started AmazonFresh. Now AmazonFresh is expanding into Los Angeles, Calif. and will be then move into the San Francisco. One industry publication expects AmazonFresh to be in 20 metropolitan areas in the next few years.
Another report says Amazon may be looking into pet supplies as another business sector.
Meanwhile, another giant e-retailer, Google, is expanding its beta site, Google Shopping for Suppliers, by recently adding another product group on its site. That product category is called mechanical components. Previously, Google only offered electronic and electrical products.
The products in this new category include actuators, bearings, fluid power and related components, hose products, pipe, valves and fittings.
Google has been tight-lipped about the success of this venture but its expansion into a new product category clearly shows that it intends to become a major player in the highly-sought B2B/industrial markets.
A number of companies have become verified suppliers on the Google Shopping for Suppliers site. Verified suppliers have a badge next to their listing and come before non-verified suppliers. These suppliers pay a fee for being verified but that fee is being waived for 2013 although Google says “that could change in the future.”
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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
Read the rest of the Top 20 list here:
#20 Crescent Electric Acquires Lake Electric Supply – March 5, 2013
#19 Reports: Copper Delivery Prices Soar – May 31, 2013
#18 Blog: WESCO Outlook – August 13, 2013
#17 Graybar achieves near-record profitability in 2012 – March 15, 2013
#16 Blog: Wesco’s Strategies For Growth – November 13, 2013
#15 Blog: Siemens shareholders approve Osram spin off – January 25, 2013
#14 Blog: Acquisitions fueled distributors’ growth in 2012 – March 4, 2013
#13 Southwire Introduces Electrician’s Tools – July 18, 2013
#12 Southwire Announces Organizational Changes – January 22, 2013
#11 2013 tED Magazine Best Of The Best Awards – August 7, 2013
#10 Blog: Amazon, Google Supply Update – August 30, 2013
#9 WSJ: Copper supply concerns – April 15, 2013
#8 Huge copper theft bust in Arizona valued at $10 million – May 6, 2013
#7 NAW speaker predicts strong economy, copper inflation for 2013 – January 30, 2013
#6 Leff Electric Acquired by AMP Electric – October 2, 2013
#5 Southwire to roll out new cable pull technology – March 12, 2013
#4 Super Bowl blackout traced to preventive equipment – February 8, 2013
#3 tED magazine 2013 30 Under 35 List – June 4, 2013
#2 Eaton executive outlines company’s future with Cooper – January 8, 2013
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