Market Intelligence: Amazon’s Foray into the Wholesale Market

May 13, 2014

We found a really interesting piece of market intelligence this week from Forbes writer Clare O’Connor. She goes very in depth into Amazon’s newest efforts to tap into the massive Wholesale market, through a new venture called AmazonSupply. We wanted to pass this along to get some perspective from our network both on the Procurement side and in the distribution and wholesale space.

Amazon started out selling books and has gone on to redefine e-commerce by selling absolutely everything under the sun, from suntan lotion to server space to diapers and television content as well as the world’s largest gummy bear. Since its founding, Amazon has been defined by a business strategy of emphasizing relentless expansion and customer focus over profit (ummh…sometimes makes us shake our heads), which has given some shareholders pause. Their meteoric expansion has disrupted a number of industries, which is concerning.

This includes everything from publishing (as described in this great New Yorker piece by George Packer) to Retail. The company is catching headlines for promising to have drones deliver packages and for beginning to roll out same-day delivery, but Ms. O’Connor has identified a little-discussed area of expansion for the company that might dwarf all those other initiatives. It’s also one that will probably have the most impact on the business areas Argentus recruits for, most specifically Procurement and Distribution.

AmazonSupply is an Amazon’s attempt to apply Amazon’s user-friendly e-commerce interface to a wholesale, B2B setting. It offers supplies across a number of common categories including manufacturing materials, janitorial/maintenance materials, lab materials and others. Despite the fact that it already has over 2 million products available, AmazonSupply has been discussed very little by Jeff Bezos, the company’s founder, in comparison to the flashier initiatives mentioned above.

But as Ms. O’Connor explains, it has hugely disruptive potential and more of us in business should have our eyes wide open. The wholesale market dwarfs the retail market in the U.S. ($7.2 trillion vs. $4 trillion), and most of the existing companies in the market are regional players with $50 million in yearly sales or less, which might make them vulnerable to a company that can deploy scale on the level that Amazon can. Ms. O’Connor’s article explains why the huge numbers of small wholesalers across North America need to be worried about Amazon’s entrance into this arena. The chief reasons are that:

  • Many existing wholesalers still make lots of their sales offline, which is ripe for disruption.
  • Amazon is already a distribution giant with tons of infrastructure in place.
  • Amazon is also well-acquainted with shipping high-quantity, low-margin orders, which is a perfect fit for wholesale.

So! For all the Procurement Professionals in our network, what’s your opinion of AmazonSupply? Have you ordered from them? Do you think they will be as disruptive as Ms. O’Connor claims? Is it better to partner with big, reliable suppliers or do smaller vendors offer unique strategic advantages? Let us know in the comments

This piece brought to you by our Social Media Manager Sam White – thanks Sam good piece

Over and out

Bronwen

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