The Impact of Amazon Supply on the Wholesale Industry

Now that Amazon Supply is in its second year of operation, it has grown immensely from its humble beginnings as a beta site that distributed over 500,000 items to its current operation as a wholesale distribution giant with a huge inventory of 2.2 million items.

In spite of this massive distribution inventory, major competitors that include W.W. Grainger, MSC Direct, and Fastenal have not indicated that this new competitor has caused them to lose any customers. This brings up the question whether Amazon Supply lived up to the original expectations.

Facts, Figures, and Assessments

According to a staff member from Forbes, while 2.2 million products doesn’t seem too staggering statistically speaking, it is important to compare this number to the average wholesale distributor that averages 50,000 products. Whether this distributor will be a threat to others depends on the effect it has on customers, purchase occasions, and categories.

Since the birth of Amazon Supply, it has focused its attention on B2B—an area in which W.W. Grainger previously played a very important role. In order to maintain an important share of the B2B market, Amazon knew it was important to beat this wholesale giant. Although Grainger will not comment on the impact of Amazon on its business, the volume of online stock show Amazon is at 2.2 million compared to Grainger at 1.2 million.

Potential Impact

While Forbes do not comment on individual companies, they do indicate the importance of understanding the difference between the ways Grainger, a multichannel business model, operates in comparison to online-only wholesale and retail distributors such as Amazon Supply.

On the other hand, industry observers are somewhat apprehensive of any disruptive impact Amazon may have on its competitors. The main reason they feel this way is because of the fact that the wholesale giant has no capabilities to provide on-site services, something more B2B customers are demanding in today’s market. They also lack a depth of understanding within the B2B market according to a representative of Modern Distribution Management.

The focus of Amazon has always been on the way people buy, rather than on the actual products they purchase. While in some categories this can be extremely powerful and disruptive to other industries, there are times when customers need the additional comfort of having someone available to provide a higher level of expertise and help them make the right choice. This may even include installation and continuous maintenance, services Amazon—as an online distributor—cannot provide.

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