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Distributor Quandary: Amazon’s Bid for Business Buyers

Amazon launched it's Amazon Business offering earlier this month, hoping to build traction with buyers of a broad range of products, from paper clips to heavy equipment. The company admits that it's gunning for the loyalty in the industrial manufacturing and technology sectors in particular, which leads to the question of whether electronics distributors should be nervous.

In the B2B space, there's been a clear upswing of adoption of online channels for buying a variety of goods and services. In fact, 68% of B2B buyers report purchasing goods online last year, compared to 57% in 2013, according to a the Acquity Group's 2014 procurement study. The study found the number of B2B buyers who spent the majority of their budgets online in the last year has doubled from 9% in 2013 to 18% in 2014.

Particularly as millennials, who are “digital natives,” take the help in purchasing organizations, the expectations of business buyers around having a consumerized business buyers experience increases. Bob Barr, managing director at Acquity Group told EBN:

Historically, the B2B industry [has been] known for particularly strong relationships between the buyer and their go-to supplier or manufacturer whom they trust. However, procurement officers and buyers in the Millennial generation are arriving on the scene expecting all of the features that come with a B2C experience, including updated pricing, inventory, and availability. This is the emerging audience that suppliers need to take into account when assessing their digital strategy– especially for those who don't have established relationships. That said, small to midmarket companies tend to be open minded to right pricing, right experience, right channel – think cheaper, with B2C features, and mobile.

Amazon is wooing these buyers with a vendor roster that includes a broad variety of products, as well access to a variety of business focused bells and whistles. “Amazon Business provides easy access to hundreds of millions of products as well as business-only selection and pricing,” an Amazon spokeswoman told EBN.  “Customers also benefit from free two-day shipping, multi-user business accounts, approval workflow, payment solutions, tax exemptions, dedicated customer support and much more.” (See the infographic below for a deeper look at the Amazon Business service.)

At least for now, electronics distributors are alert but unfazed by the development, saying that their organization understands and serves electronics OEMs in ways that a broad-focus seller like Amazon can't hope to match. “A lot of people in our industry worry about Amazon,” Tom Galligani, vice president, supply chain, Future Electronics told EBN in an interview. “However, when you look at Amazon and what they are doing, I don't believe they can service our customers even close to the way that we service them especially when you consider the challenges of demand fluctuation accuracy.”

Mark Burr-Lonnon, senior vice president, EMEA and Asia, at Mouser Electronics points to ship and debit programs, and “a strong negotiated sell,” as differentiators that will keep electronics customers loyal to their traditional distribution channels. “Amazon thinks it can be involved in every business,” he told EBN. “In many, it can, but in others they add less value.”

Especially in the electronic component industry, electronics manufacturers want to avoid price erosion and minimize risk of counterfeit parts. These concerns, at least for now, also ensure some safety for franchised distributors. “Unless a company like Future is partnering with Amazon, a customer will be reluctant to buy through Amazon not knowing where the parts came from,” said Galligani.

Further, Amazon isn't taking aim (at least yet) on the OEMs and electronics firms that need a little bit of help in getting products from the drawing board into production. “Amazon isn't going to put engineers on staff to help with the design phase,” said Galligani. “That's where they will lack some of the credibility with our customers.”

At the same time, distributors recognize that the sales landscape is constantly shifting—and distributors may need to evolve and change to keep up with new offerings from competitors like Amazon. “Our customers need a supply chain with bonded inventory and the ability to download a bill of materials for quoting and life cycle analysis,” said Walter Tobin, corporate vice president at Future Electronics. “Once Amazon gets this, some of us will be affected.”

For today, parts brokers, gray market distributors, and catalog houses are the ones that are most likely to lose business to the retail giant. Let us know what you think in the comments section below.

— Hailey Lynne McKeefry, Editor in Chief, EBN Circle me on Google+ Follow me on Twitter Visit my LinkedIn page Friend me on Facebook

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