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Alibaba’s IPO, AmazonSupply & the Supply Chain Connection

Two big factors could shake up the electronics supply chain in short time: Alibaba's much-anticipated IPO and Amazon's bet on B2B distribution.

Widespread analyst and news reports anticipate a massive business-to-consumer e-commerce faceoff between the Chinese powerhouse Alibaba and the US giant Amazon. However, some factors just below the surface at both companies could touch the electronics supply chain directly and indirectly.

First, there's Alibaba's IPO filing in the US a few weeks ago. Bloomberg reports that the IPO is expected this summer with a float of about $20 billion. This would leave the company flush with cash, which it could use to boost its cloud services and mobile payment platforms. There's already speculation that it could strengthen its relationship with Haier Group and expand its transportation and logistics capabilities via its new 11 Main e-commerce site.

As Marc Herman told us in a January EBN post, Alibaba and Haier are reportedly trying to deliver more goods to midsized cities in inland China. There may also be a play toward the smartphone market.

In a February EBN Q&A, Wade McDaniel, vice president of solutions architecture at Avnet Velocity, wrote that not much is known about the 11Main.com business model, except that it will be run independently by Alibaba's US subsidiaries Vendio and Auctiva. However, “Alibaba is expected to leverage its existing infrastructure and will be investing heavily ($16 billion) in logistics and support in the next six years,” he wrote. “Most of this is to support domestic customers in China, but I can't help but think that some of that might make its way into other markets where Alibaba is investing — say the US.”

The IPO could give Alibaba enough cash to invest in world-class logistics centers and state-of-the-art warehouse and transportation management systems, McDaniel wrote.

Interestingly, the company also has dedicated talent to engineering and data analysis, areas that could be of particular interest in building cloud, mobile money, logistics, and warehouse management services. The Wall Street Journal, citing IPO filing documents, reported that Alibaba had 20,884 employees as of Dec. 31, including 7,306 working in engineering and data analysis.

Next, there's AmazonSupply, a B2B wholesale and distribution market bet that got some updated coverage about the same time Alibaba's IPO filing was making headlines. The wholesale and distribution hub was started in 2005. EFT’s Vivek Sood reported last month that it carries 2.2 million products, including office equipment, industrial components, and materials.

Sood speculated that the age of B2B exchanges may finally be coming to fruition:

Already, wholesalers are whispering about the threats from AmazonSupply; although many specialty wholesalers and distributors are somewhat confident that their turf is safe from the giant's claws due to their highly segmented market.
Nonetheless, nobody knows what will happen in future. AmazonSupply, Alibaba, or B2B exchanges, could become so powerful that they will suck small players into their enormous vacuum of suppliers. The process can even accelerate if trust keeping mechanisms are built into B2B exchanges.

So while the competition heats up for Alibaba and Amazon, it will be interesting to see what the long-term effects will be on the way goods are bought and sold in the high-tech space. What do you think the bullwhip effect will be?

37 comments on “Alibaba’s IPO, AmazonSupply & the Supply Chain Connection

  1. Eldredge
    June 16, 2014

    I could see where AmazonSupply could provide some challenges/competition to other supply houses, such as Grainger, Fastenal, etc. Maybe even office supply businesses like Staples. Any chance thay would work with some of these suppliers, rahter than compete head-to-head?

  2. Ariella
    June 17, 2014

    @Eldgredge I've been given the impression that office supply retailers have not been doing very well. I recall hearing that Staples was planning to close about half its retail stores. While the online sales may still be strong, it probably needs some retrenching as a brand and supplier.  

  3. FLYINGSCOT
    June 17, 2014

    If Alibaba and Amazon really sync up properly it will great a real powerhouse in the market.  let's hope it leads to better things for all and not to a world dominator in the bad sense.

  4. Ashu001
    June 18, 2014

    Ariella,

    I have seen first-hand the Mess that Staples is in today.

    It has a lot to do with the fact that we are moving away from Paper to a more Digital/Paper-less world.

    I doubt all those Stores they shut are ever gonna come back.

     

  5. Ashu001
    June 18, 2014

    FlyingScot,

    Not everyone expects or believes that Amazon and Alibaba will get their Synergies/Strategies going immediately at first glance(I for one certainly don't think so).

    For such a firm to become a World Dominator ;that too in a Business which has such low barriers for Entry is expecting too much currently.

    What is most likely to happen is that the Cost Savings they gain are insignificant and not worth the Transaction(and other related) costs.

     

  6. Ashu001
    June 18, 2014

    Eldredge,

    Co-opetition(what you are proposing here);Is going to be the likely end result of this Deal.

    These companies will compete in some areas and colloborate in others.

     

  7. Ariella
    June 18, 2014

    @Ashish Hi, after I left that comment yesterday, I actually stopped into a Staples store. I needed to buy more printer ink and checked the price on the site in advance. When I got there, though, I discovered that the store price is higher than the site price. As it's not an emergency, and the site offered both free shipping and a promotional gift card with purchase, I ended up leaving the store and buying online. That kind of thing is not going to keep retail locations open. 

  8. Hailey Lynne McKeefry
    June 18, 2014

    @Eldredge, i have little doubt that amazon won't set its sights (and site) on selling anything that it sees as a potential revenue stream. It wouldn't suprise me a bit if it began a much bigger push into the b2b space.

  9. Hailey Lynne McKeefry
    June 18, 2014

    The writing is on the wall with office supply stores. The Wall Street Journal predicted it a couple of years ago: New Web Victim: OfficeSupply Store – Wall Street Journal

    And now Staples is indeed closing 12 percent of its North American Stores: Office Supplies Giant Staples Closing 12% of North

     

    The question for me is that are they going to start selling components to electronics hobbyists in a big way? Do a serch on the site and you'll see that it's already started. And would they then take that to the B2B space? It doens't seem outside the realm of possiblity to me.

  10. Hailey Lynne McKeefry
    June 18, 2014

    @Tech4People, i think it's less about paper and more about “Why go to the store when you can get it dropped at your door and pay less?” All of these items are basics–so it's not like you don't know what you are getting.

  11. Eldredge
    June 18, 2014

    The question for me is that are they going to start selling components to electronics hobbyists in a big way?


    Seems like a logical appraoch – and also to the B2B quivalent of the hobbyist –  the prototyping engineer.

  12. Ariella
    June 18, 2014

    @Hailey one option is to get into 3D printing services to round out its standard printing options. Staples already did that in Europe a couple of years ago and just launched the service in the US. From STAPLES' 3-D PRINTING SERVICE HAS ARRIVED

    Two years after testing 3-D printing service centers in Europe, office supply and services giant Staples is trying the concept in America, with two 3-D printing “experience centers” in New York and Los Angeles. The idea is to educate consumers and small businesses about 3-D printing and more easily facilitate its use.

    The centers–which opened inside the Fifth Avenue and Studio City stores in the last month–are in partnership with 3D Systems, which is providing the design, scanning, and printing hardware and software for occasional use or to try out before purchasing. Staples offers assistance from 3-D printing experts and eventually plans more such centers.

  13. Hailey Lynne McKeefry
    June 19, 2014

    @eldredge, it's just a short hop from hobbyist to design engineer for sure.

  14. Hailey Lynne McKeefry
    June 19, 2014

    @Ariella, 3D printing services are going to be big. I wonder, though, whether the diminishing cost of the technology will help or hurt these service providers. On the one hand people can do it themselves, but most won't want to do 3D printng so often that they would get a machine for home. Kinkos, here in the US, made a mint on printing services well after printers were very affordable so there may still be some runway left.

  15. Daniel
    June 19, 2014

    “Co-opetition(what you are proposing here);Is going to be the likely end result of this Deal. These companies will compete in some areas and colloborate in others.”

    Asish, that's the best way for growing , by complimenting each other.

  16. Daniel
    June 19, 2014

    “When I got there, though, I discovered that the store price is higher than the site price. As it's not an emergency, and the site offered both free shipping and a promotional gift card with purchase, I ended up leaving the store and buying online. That kind of thing is not going to keep retail locations open. “

    Ariella, obliviously. For online sales overhead expenses are very less when compare with selling through retail shop.

  17. Ashu001
    June 19, 2014

    Hailey,

    That's a Fair Statement to make.

    Nobody wants to pay Top Dollar for Basics especially those which are so massively commoditized today and Brand-Name Companies stand to Gain Absolutely nothing from attaching their Brands to these Products.

     

  18. Ashu001
    June 19, 2014

    Jacob,

    Yes,Lot of Businesses are now adopting this Strategy-Co-opetition today.

    You Compete in some areas but Cooperate in the others where you have complementary Strengths.

    Its also a great way to Pool Resources today to ensure everybody eventually wins.

     

  19. Ashu001
    June 19, 2014

    Ariella,

    This is so Dumb at so many Levels I can't but help shake my head in dismay.

     

    The Hardest Part of the Retail game(as I am sure you are aware) is to convert Sales Leads into actual Sales).

    Think about it from a Business Owner's Point of View.

    You gave the Same Company,Not one but TWO oppurtunities to close a Sale and they failed Decisively.

    What is the Guarantee that after you step out of that Store;you would still buy from Staples Online only?

    None,Zero.

    In the Online Space they could have done so much more to retain you as a customer as well.

    Shows you that is a company not cut out to Survive today's Cut-throat Retail Competition.

    Regards

    Ashish.

     

  20. Daniel
    June 20, 2014

    “Yes,Lot of Businesses are now adopting this Strategy-Co-opetition today. You Compete in some areas but Cooperate in the others where you have complementary Strengths. Its also a great way to Pool Resources today to ensure everybody eventually wins.”

    Ashish, you are right. The best example is Samsung-Apple pact. Apple is using Samsung screens in IPhone and IPad, at the same time they are a major competitor for Apple in IPhone and IPad segment.

  21. SP
    June 21, 2014

    If Alibaba and Amazon join hands for some product release they can give good competition to others.

  22. ahdand
    June 23, 2014

    @sp: I don't see it happening anywhere in the near future. Also with both parties earn loads of money in different ways, combining it will reduce the net value for them. 

  23. Daniel
    June 23, 2014

    “If Alibaba and Amazon join hands for some product release they can give good competition to others.”

    SP, I think both are online traders. Yes they can also complement each other by share their warehouses or listing each other's products or shipping from near by warehouse.

  24. Daniel
    June 23, 2014

    “I don't see it happening anywhere in the near future. Also with both parties earn loads of money in different ways, combining it will reduce the net value for them. “

    Nimantha, it's there at back end by sharing their warehouse and shipping. When Amazon starts their Indian operation (www. Junglee .com), they used to list products from different websites.  User can select the item based on beast prices.

  25. Ashu001
    June 23, 2014

    Jacob,

    I kinda think all the Korean Companies are Pros at this strategy.

    Look at LG as well for that matter.

    Most of the World's Flat Screen TVs come from only 2-3 Manufacturers now[LG,Samsung & Sharp];everyone else just simple buys from them.

    That's also why I don't really see the Brand Distinction that they try to make today[Its beyond Laughable]!!!

  26. Daniel
    June 24, 2014

    “I kinda think all the Korean Companies are Pros at this strategy. Look at LG as well for that matter. Most of the World's Flat Screen TVs come from only 2-3 Manufacturers now[LG,Samsung & Sharp];everyone else just simple buys from them.”

    Asish, that's true. I think it's a kind of cooperation within the companies, so who ever need their item they will compliment each other.

  27. Ashu001
    June 30, 2014

    Jacob,

    This is a perfect example of a case where you should seriously Look beyond the Marketing and Focus more on Customer Service and Cost of the Product offered.

    Everything else is just noise.

     

  28. Daniel
    July 2, 2014

    “This is a perfect example of a case where you should seriously Look beyond the Marketing and Focus more on Customer Service and Cost of the Product offered.  Everything else is just noise.”

    Asish, customer support is the primary thing. Rest comes automatically.

  29. Ashu001
    July 28, 2014

    Jacob,

    Only someone who has maturity,Experience & Patience can search for and find the right companies with Customer Service that meets(or even better Exceeds your) Expectations!

    Easier said than Done(I am sure you agree)!!!

     

  30. Daniel
    August 5, 2014

    “Only someone who has maturity, Experience & Patience can search for and find the right companies with Customer Service that meets(or even better Exceeds your) Expectations! Easier said than Done (I am sure you agree)!!!”

    Ashish, I suggest all companies have to lift up their CSR department to meet customer expectations.

  31. Ashu001
    August 31, 2014

    Jacob,

    Excellent Suggestion!

    But my question was more around why is'nt it happening as such (by default) today?

    Why do we need to keep getting tortured(at the Hands of these Companies) and be made to run from Pillar to post to get relatively very simple stuff accomplished?

    I remember a case a few years back when I had purchased a lot of Laptops from a particular Brand for my Company.Unfortunately I forgot to create an OS(as they specified when you start the machine).

    One of the machines needed to be formatted and just to get a Copy of the OS the company in question made me run from pillar to post!

    Eventually,I swore to myself never to use that company again.And To this day I have worked with that philosophy in mind.

     

  32. Daniel
    September 2, 2014

    “Excellent Suggestion! But my question was more around why is'nt it happening as such (by default) today?”

    Asish, very simple; customer never demand for that. when demand comes they may equip with such things.

  33. Daniel
    September 2, 2014

    “Eventually,I swore to myself never to use that company again.And To this day I have worked with that philosophy in mind.”

    Asish, good and its possible, provided alternate sources are there. But in certain cases we may force to approach the same guy again and again due to the lack of alternate sources or he may be better than others.

  34. Ashu001
    September 2, 2014

    Jacob,

    Its not easy but trust me its distinctly possible to build an Ecosystem of Suppliers for most products who can easily make up for one another if One fails due to any reason.

    It takes time and effort and most importantly a bit of Planning but its certainly do-able.

     

  35. Ashu001
    September 2, 2014

    Jacob,

    I don't think its a question of the “Customer Never Demanding it”;its more a question of the Customer never using their Pricing Power to act accordingly.

    For instance,Are you aware that Colgate Total(a Famous Toothpaste) contains a Chemical called Triclosan;which causes Cancer?[Do your research and look it up at the FDAs site as well].

    And still the Company is selling that Product on the market.

    So what should consumers do?

    Avoid Using Colgate entirely and look for Alternatives[Atleast that's what I do].

    You can use the same philosophy here as well with Electronic Parts Providers.

     

  36. Daniel
    September 3, 2014

    “Its not easy but trust me its distinctly possible to build an Ecosystem of Suppliers for most products who can easily make up for one another if One fails due to any reason. It takes time and effort and most importantly a bit of Planning but its certainly do-able.”

    Asish, yes right. That's set we used to call as preferred vendors.

  37. Daniel
    September 3, 2014

    “For instance,Are you aware that Colgate Total(a Famous Toothpaste) contains a Chemical called Triclosan;which causes Cancer?[Do your research and look it up at the FDAs site as well]. And still the Company is selling that Product on the market. So what should consumers do? Avoid Using Colgate entirely and look for Alternatives[Atleast that's what I do]. You can use the same philosophy here as well with Electronic Parts Providers.”

    Asish, here we are looking for alternate because it's not good to health and it's a generic report. But when it comes to CSR, there won't be any such study report or generic findings. Different set of customers have different type of experiences and they are not sharing amnion the customers.

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