Every weekday in December, tED magazine is counting down the Top 20 Stories of 2016. Below, the #9 most-viewed story of the year, originally published on September 6, 2016.
By Bridget McCrea
When Walmart announced in August that it was buying Jet.com for $3.3 billion, the speculation began to swirl around what this move would mean for the business-to-consumer (B2C) and business-to-business (B2B) e-commerce sectors. And while most experts agree that this particular move was meant to bolster the retailing behemoth’s online presence and help it go head-to-head with companies like Amazon, it could also spell trouble for distributors that are dealing with an increasingly mobile and tech-savvy customer base. Those that haven’t made the investment in e-commerce, for example, could find themselves battling it out with much larger competitors in the not-too-distant future.
Mike Connors, CEO at Bulbs.com, says the Walmart-Jet acquisition was likely spurred on by the larger retailer’s long-standing competitive disadvantage in the e-commerce space. “Walmart’s online revenue was a fraction of Amazon’s, so it went out and purchased a company that already has ‘e-commerce energy’ and a long customer list,” says Connors, who is dubious about the potential culture fit between the two companies. “We’re talking about two very different organizations, and it will be interesting to see how it all plays out.”
Mixing Bricks and Clicks
Amazon hasn’t been shy about tossing its hat into the B2B sales ring. What started out as Amazon Supply has now become known as Amazon Business, a B2B site where merchants (including industrial distributors) can sell their wares using the Amazon brand. Connors expects this momentum to continue as the larger e-tailer ferrets out new ways to reach B2B customers.
To that end, Connors says he wouldn’t be surprised if Amazon put “feet on the street” and started calling on large, corporate accounts. “Amazon can do a lot on the digital front, but there are some areas where it would need to have a team to go in and work in a large, corporate environment,” says Connors, “be it Ford, Boeing, or even just while working with a small business customer.” He points to Amazon’s new, physical grocery pickup location in Seattle as just one example of how the e-tailing giant is making inroads in an area previously reserved for bricks-and-mortar enterprises.
In terms of Walmart, Connors says the retailer already has a large advantage over the more digitally-focused Amazon (even if the latter begins to make inroads with its physical locations). “Walmart has a great opportunity that Amazon lacks because it already has thousands of brick-and-mortar locations across the country,” says Connors. “Those locations may not be B2B inventory depots, but generally speaking retail locations are being downsized more than they’re being increased at this point.”
In other words, if Walmart finds a way to combine “bricks and clicks” through its recent marriage with Jet, then it could actually come out ahead of Amazon in the long run. “If you watch the news, you’ll see one retailer after another attempting to optimize their brick-and-mortar footprints,” Connors notes. Home Depot and Staples, for example, are just two retailers that were once focused on adding physical locations and that have since begun closing those locations and focusing more on their e-commerce initiatives.
And while Amazon is already selling to businesses on a 2-day delivery model (for many of its products), Walmart could take that model to a new level by offering both 2-day delivery and the ability for customers to pick up orders at one of their many physical locations. The electrical contractor that needs a quick replacement for an incorrect order could conceivably run to a nearby Walmart to get the issue rectified, rather than having to wait a day or two for resolution. “At least for the near term, that’s something Amazon can’t do,” says Connors, “because it just doesn’t have that many legacy buildings sitting around out there.”
Ultimately, if Walmart can push its business along and start to feel like it’s in the same e-commerce space as Amazon, says Connors, then electrical distributors and other B2B companies could see their sales impacted. “They still have a long way to go,” he notes, “but once that momentum picks up, Walmart will likely start looking at what else it can do.”
Where are We Headed?
Buying online has become a huge part of the average American’s personal life. That’s slowly spilling over into the B2B space, where an increasing number of customers want to be able to shop in a 24/7/365 environment online and have their materials delivered quickly and accurately. Missing with the latter, according to Connors, are the personal relationships that traditional distributors have established with their customers. Independent distributors continue to harp on this issue as more online players invade their turfs, but these bonds may not be enough in the increasingly digital business environment of the future.
“There’s no doubt in my mind that we’ll see some shifts as the baby boomers retire and are replaced by generation X and the millennials—all of whom are using their smartphones, tablets, and computers,” says Connors, “and who are very comfortable making online purchases and less interested in relationships. They just want to go out and look at what’s available and make a purchase.”
Connors points to the recent B2B E-Commerce article Industrial tape seller builds an online B2B niche that sticks,as proof of how a very traditional business model (like electrical distribution), can be upended by the growth of B2B e-commerce. “Here we have an ex-tech executive who is selling over $5 million in tape a year, half of which involves painters and electrical contractors who are out working on jobsites,” says Connors, who has reached out to the subject of the article to “pick his brain” about that successful online model. “He has an interesting relationship with Amazon and in a space that’s very similar to ours.”
Looking ahead, Connors expects to see even more Walmart/Jet-type acquisitions in the cards. “It goes without saying that the industrial distributorship and electrical distributor markets are really ripe for more mergers and acquisitions of this type,” says Connors. “I think that, at some point we’re also going to see some of those electrical distributors finally waking up to an understanding that they need to take on e-commerce. As of yet, however, the major wakeup has yet to occur.”
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 email@example.com or visit her website at www.expertghostwriter.net.
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