I know we’ve talked in the past on manufacturers using the likes of Amazon Supply to make your product available through another distribution option. Many of our clients are using Amazon Supply along with their traditional distribution, but until a few weeks ago, I never heard of Alibaba until they started trading on the NYSE.
For those of you who may not know who Alibaba is, it’s a giant e-commerce site started in China and has received traction worldwide. Its model is to build relationships between manufacturers and their customers. Its model is not to sell anything, but to just hook up the right user with the right manufacturer. They get paid by the manufacturers to coach them on how to be more attractive online to potential buyers. As they grow in this country, it will be essential that manufacturers get on the bandwagon because of the size of their network.
One is Vendor Flex (where they are setting up shop in P&G facilities and ship direct out of there) and AmazonFresh (where they set up a program with food producers to deliver items directly to consumers).
I think the key point Bridget is trying to make is that both Alibaba and Amazon want to take over the customer relationship.Where will that leave you? Where does that leave your current distribution model? I certainly am not saying that all power transmission parts are going to be purchased online, but all signs are pointing to more and more purchases, even in the industrial sector, being done on the internet.
Who will have the ultimate power of the purse? Down the road, when someone buys a hydraulic fitting from a supplier, Amazon may pop up and say people who buy this normally buy hose too. If you’re a hose maker, will it be yours they are pushing? This should be interesting.
As a point of reference, before reading this article, did you know what Alibaba was?
It’s been two years now that Amazon decided to get into the industrial space and compete with the traditional brick and mortar stores. Google shopping even jumped in for a while (though they recently discontinued their pilot program).
I’ve written a few posts over the last couple of years asking you, the manufacturer, if you’ve jumped on the band wagon. For those that have, I’d be interested in what kind of results (sales) that you’re getting from this channel?
A bigger question is, are the big boys, Grainger, MSC, Fastenal, etc., becoming a bigger percentage of your sales number?
What’s your forecast going forward? Are the independents still going to be a vital part of your go-to market strategy?
I know these are lots of questions, but I’d like to get a feel for where folks are going to be focusing on in the future. Here are some of my thoughts Distributor Strategy: What’s yours?
With an 800 lb. gorilla like Amazon, once they come into your playground, things will certainly have to change. Big online giants are not new to this market. We’re used to the Grainger, McMaster Carr and MSC’s of the world. The difference in my mind is that while price is important to them, they are selling more of a convenience. The Amazon model is a bit different and price points are more critical.
AmazonSupply has been up and running for about a year now. I wrote a post last summer and asked how they might be influencing your business. Back then it might have been too early to tell. (I sure would like your input now.) I assume many manufacturers are using them as another outlet for their products. The trends are indicating that the traditional distribution models are declining.
I recently read an article by Scott Benfield in Industrial Supply, Trials and Tribulations of Sales Growth in an AmazonSupply World that outlined the difference and suggested ways traditional distribution can effectively deal with them. According to Scott, it comes down to the way traditional distribution goes to market. He calls it the bundle approach (full service) as opposed to a transactional model with a much lower cost base.
He also recommends strategies moving forward for the “new normal.” In my mind, I’d hate to see the traditional distribution model go away. There’s lots of value in their expertise, but if they are not willing to change, then the future might be dim for some of them.
Manufacturers, what are your thoughts on the different distribution models and where is your sales staff spending their time and efforts? Better yet, what can Associations like ISA do to help their members?
It’s been a few months now since Amazon announced its serious entry into the MRO market with Amazon Supply. The new service directly goes head to head with Grainger, Fastenal, McMaster Carr and MSC Direct.
If you already sell through any of these, what are your feelings about another player in the market?
More importantly, what about all those independent distributors in Hometown USA? I have to believe most of you get more sales from them (and more profits) than you do from the big boys. How do you think this will affect them?
Here are our three takeaways:
1) User Interface – which will challenge the current online transaction experience from established industrial suppliers/distributors; b-to-b commerce will be competing against a better and more established b-to-c customer experience standard
2) Price Transparency – which industry observers say will lead to reduction in pricing and margins
3) Expansion into Other Verticals – potential for Amazon Supply to expand beyond MRO into other vertical markets