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What Has Amazon Been Up to Lately?

What Has Amazon Been Up to Lately?

By Bridget McCrea

Punch the words “commercial lighting” into the Amazon Business search tool (across all departments) and the first page of results turns up a 4-pack of outdoor lighting, a few LED lights, some recessed lighting fixtures, and a 5-unit pack of 40W incandescent panel lights. A search for “electrical conduits” found a $150 TEMCo Hydraulic Knockout Punch tool kit, 1-inch split wire loom tubing (for $25), and 100 feet of ¼ inch white flexible split loom for $20.46. In a similar search for “circuit breakers,” the site came up with an Xscorpion manual reset option for $17.21, a few different variations of Imperial circuit breakers in the $50 to $75 range, and a Nippon resettable circuit option for $21.29.

Digging a little deeper, most of the products are listed as “shipped from and sold by” their manufacturers, with some of them being sold by distributors or hardware stores. Some of the Imperial circuit breakers, for example, were linked to Life and Home (a site operated by AG Lock and Hardware, Life and Home positions itself as “a family owned and operated business that has been in the traditional hardware business since 1978.” According to its Amazon profile, the company maintains an online database of more than 100,000 items.

These are just a few examples of the inroads that Amazon Business is making in the electrical distribution market. No matter how small or insignificant these steps may be, the bottom line is that the e-tailing behemoth wants a piece of the B2B e-commerce pie. Projected to reach $12 trillion in sales by 2020, up from $5.5 trillion in 2012, according to research firm Frost & Sullivan, the B2B space continues to grow as more companies conduct buying and selling online.

Enter Amazon Business
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.”)

“With the launch of Amazon Business, Amazon is clarifying its positioning in the B2B space,” said Andy Hoar, an e-business analyst at Forrester Research, in Say hello to Amazon Business, good-bye to AmazonSupply. “The realignment enables them to consolidate their B2B assets and simplify their value proposition to B2B buyers.”

The Internet Retailer article went on to describe how Amazon Business is offering products directly from Amazon itself as the seller of record, in addition to products from third-party marketplace sellers that compete with Amazon for the primary selling position in the “Buy” box on product pages. According to Internet Retailer, Amazon charges third-party sellers a commission on sales ranging from 6 to 15 percent, depending on the product category and the size of an order, for business sellers selling to business customers.

For example, for consumer electronics, the fee is equal to 8 percent of total transaction value of up to $1,000, and 6 percent of value for transactions greater than $1,000. And for industrial and scientific products, the fee is 12 percent of value up to $1,000, 8 percent of value from $1,000.01 to $3,000, and 6 percent of transaction value of more than $3,000.

In other moves, Amazon began testing out an Uber-like delivery service for delivering its one-hour Prime Now packages and announced that “delivery by drone” would soon revolutionize the way people shop for items they need quickly. And while the days of using drones to drop off shipments at the job site are probably still a few years off, Amazon’s attempts to satisfy customers’ “want it right now” needs are impacting the way companies think about shipping methods and times.

Warding off the Potential Threats
If Amazon’s goal is to tread on the territories of independent electrical distributors, NAED members don’t seem to be overly concerned with its advances. And while they clearly know that the online e-tailer has set its sights on a wide range of industrial products, distributors as a whole aren’t making any big moves to thwart the company’s advances.

“We see very little threat from Amazon,” says Doug Borchers, former vice president at Dickman Supply in Sidney, Oh. (Note:  in late-November, Borchers left the industry and it now president of Superior Aluminum Products.) “We keep waiting for it to affect our business, and in turn have upgraded our web order entry site, but [Amazon] just hasn’t affected us much – if at all, thankfully.”

Brad Van De Sompele, president at Frontier Electric Supply in Bensenville, Ill., shared Borchers’ sentiment and says his company hasn’t seen much traction on Amazon Business’ part. “Quite honestly,” Van De Sompele says, “in our little niche market here, we don’t hear or see much of a push by Amazon.”

At Springfield Electric Supply Company in Springfield, Ill., E-commerce Solutions Coordinator Pamela Nation continually hones and upgrades its own e-commerce platform, but not in answer to Amazon Business’ attempts to move into the electrical distribution market. “The thing that Amazon, eBay, and others fail to understand – or have the ability to provide – is service after the sale,” Nation points out.

“Yes, customers are buying from those companies, but what happens when they have a problem or a failed part? It only takes one major incident to realize that their local distributor can help them out,” Nation continues. “Also, Amazon and eBay are not customizable to the customer. Our site can be made to fit the customer’s needs. That is a game changer.” (Read about Springfield Electric Supply’s e-commerce strategies here.)

Big Boxes Answer the Call
If there’s one segment of the market that’s worried about Amazon Business, it’s the big boxes like Home Depot and Lowe’s – both of which are bracing themselves for the competition. “Both of those companies are getting more aggressive in the professional market,” observes Jim Dunn, executive vice president of sales and marketing for Warshauer Electric Supply Co., in Tinton Falls, N.J. “As far as NAED members – and particularly the electrical wholesale market in New Jersey – we’re not seeing much of an impact from Amazon Business.”

But that doesn’t mean distributors like Warshauer Electric are sticking their heads in the sand and hoping that the threat passes. According to Dunn, the company is assessing its e-commerce initiatives and looking at how to improve its online approach for the coming year. “I can’t speak for other distributors, but I think you’ll see us taking a completely different track when it comes to e-commerce,” says Dunn, who was hoping to have that “track” in place for 2015, but is now focused on the effort for 2016. He says the cost of a new ERP solution was the main obstacle.

“By the time you buy the software and the hardware, it becomes a 7-figure play,” says Dunn. “We have the resources and finances, but we want to make sure we also have the time and energy to be able to focus on it. It’ll be budget item number one for us during the coming year.” Dunn is quick to point out that the initiative is not meant to compete with Amazon. “At this point, trying to compete with Amazon – or the big boxes – is just a race to the bottom; that’s not our goal,” says Dunn. “Our e-commerce solution must be a value-added solution that makes it easier for our existing customer base to do business with us, shop with us, and get pricing on a 24/7/365 basis.”

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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