Distribution. It’s a tough business—but someone has to do it. Organizing suppliers, warehouses, and customers, orchestrating procurement, storage, and shipment, and doing so while fending off competition from every angle; your success relies on making sure everything happens the way you want it to.
A business traditionally created on long-term relationships, many companies have seen their interactions shift. Supplier portals and ecommerce make for less human contact, growing distributors have become faceless, and decades-long relationships in many industries are now judged on “what have you done for me lately?”
This has become even more of a pressing issue with the entrance of Amazon into the wholesale distribution industry. Not only have they created new expectations from your customers who seem to expect the fast shipping and ease of use they get every day from their consumer lives, Amazon Business is quickly becoming a distribution behemoth. In part one of this two-part blog series, we’re going to take a look at the overall pressure that the company is putting on wholesale distribution companies and follow up with strategies to fend off the “wholesalepocalypse.”
Indirect and Direct Pressures from Amazon
Whether you’re in media, cloud hosting, ecommerce, or distribution, Amazon has a hand in your industry. While often this is for the better, when they turn their eye towards your industry, they pose an immediate and profound threat on your lifeblood.
Award-winning TV like Marvelous Mrs. Maisel, the ability to transform your business with AWS, a phone case delivered in hours, or easy delivery of business products ranging from toilet paper to tools, Amazon has changed the way business works. Now, with an eye on distribution through Amazon Business and the quiet launch of Amazon Freight, distributors have limited time to react.
Evolving Customer Needs
If one thing has changed in the past decade, it’s been customer expectations. Need a household item, groceries, or something in the next day? Go to the store. Need something online? Order and expect to wait a few days.
Today, however, you could live most of your life without ever needing to shop in person. You can get everything from toiletries to pantry items to electronics delivered same-day—often for free. Amazon has changed customer expectations, even in the B2B world. This puts immense pressure on distribution businesses, who no longer can rely on the power of relationships with customers.
As with their lives on the consumer side, your customers expect information to be readily available, shipping to be reasonably fast, and selection to be robust.
While Amazon has inherently reshaped the expectations of your customers in their personal lives and led to your customers demanding faster shipping, a better ecommerce experience, and more for their business, the company has also become the elephant in the room—and a direct competitor.
Much like any form of disruption, the “wholesalepocalypse,” a term coined by MDM’s Ian Heller, came as a result of shortsightedness. Many saw their peers on the retail side lose ground over the last decade as Amazon became the de facto option for B2C. However, these same distributors seemed to show little concern over the B2B platform when it launched.
However, Amazon Business did launch and has begun to take over the B2B space. Offering everything from janitorial supplies to raw materials, industrial equipment, and material handling solutions, Amazon Business is taking over.
It’s likely taken decades or even generations for your distribution company to become a local or regional force—it took Amazon Business less than a year to generate $1 billion in revenue before joining the ranks as a top 10 global industrial distributorin MDM’s 2018 Market Leader Report. By 2021, Bank of America analyst Justin Post estimates Amazon Business will own a 10% market shareof the $1.4 trillion distribution market.
With hundreds of millions of SKUs, the ability to integrate with procurement software, 45-60 day invoice terms, spend visibility, and much more, Amazon poses an immense threat for every distributor—not just those selling lightweight supply.
With the quiet announcement that they have entered the $72 billion freight brokerage market, there’s good reason for distribution companies to fret. Currently offering limited service—full truckload dry van service in the Northeast—it’s only a matter of time before they extend their carrier network into new locations and markets. Once they internalize this portion, they will have even more power to deliver large equipment and raw materials at a lower price.
Check out part 2 of this blog: Surviving Disruption in Distribution: Adapting to Amazon’s Expansion
Weathering the Storm: How Distributors Can Approach the “Wholesalepocalypse”
As mentioned above, you’ve likely been in this business for decades—Amazon has been in the B2B space for less than five years. While this does make them a threat, it still means they haven’t gotten everything in place just yet. Distributors have some time to act, but the window of opportunity is closing.
In our next article on weathering the coming threat from Amazon, we will explore some of the steps you can take to shore up your defenses and protect your business.
Get to Know MIBAR
At MIBAR, we have worked with wholesale distribution and other product-centric businesses since our inception and know what it takes to deliver. A leading implementation and support partner for leading distribution-focused ERP, CRM, BI, and other business management software, we have the skills, size, and scope to deliver the products you need to weather the coming storm.
We invite you to discover how companies like yours were able to gain more visibility into products, customers, and supply chain processes by reading our case studies, learn the top reasons wholesale distributor replace their ERP systems, and contact us for a free consultation.