There’s an 800-pound gorilla in the room. It’s called Amazon. Yet not everyone sees it as inevitable that the e-commerce and distribution giant will dominate electronic component distribution.
In a recent interview with Tom Galligani, global vice president of supply chain for distributor Future Electronics, I asked for his views on Amazon’s invasion of the B2B space. Given the size and power of Amazon, you might expect distributors like Future Electronics to be prepared to be put out of business, but that is not the case. In fact, Amazon’s entry into the B2B marketplace creates a unique set of opportunities for buyers as well as suppliers or distributors.
Nevertheless, like others in the electronic components distribution industry and beyond, Galligani and his team are keeping a close eye on Jeff Bezos’ $90 billion e-commerce behemoth. Amazon may have gotten its start with an unbeatable B2C experience, but it has made inroads — both organically and through acquisition — into the B2B market.
In 2005, Amazon acquired SmallParts.com, which billed itself as “the hardware store for research & development.” By 2012 the business unit had evolved to become AmazonSupply, which offered well over 2 million items wholesale. Earlier this year, Amazon announced that AmazonSupply was becoming Amazon Business, explaining that the rebranding indicated a repositioning of its B2B value proposition.
This summer, Galligani made the following statement to business blog Behalf about Future Electronics’ and other companies’ reactions to Amazon: “A lot of people in our industry worry about Amazon … 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.”
Clearly, Future Electronics does not plan to compete with Amazon on price — it would most likely lose that race to the bottom. Nor is it looking to match Amazon’s distribution network, which is second to none. Galligani sees instead Amazon’s entry into the B2B space as creating a new range of choices for buyers.
If buyers want bare bones low prices, Amazon is an option. But if they are looking for support with design cycles, risk mitigation, and inventory positioning, traditional industry distributors will remain proven alternatives. And unlike the low-cost approach, being a trusted partner creates the opportunity for higher-margin value-oriented services to users of electronic components. This doesn’t mean that efficiency goes out the window, but it does give distributors an incentive to invest in creating the knowledge-based offerings that many buyers want.
To read the rest of this article, visit EBN sister site Design News.