Is Amazon poised to conquer industrial supply market?

“Conquer” may be a strong word, but Amazon’s entry into the business-to-business industrial supply market is sure to mix up the industry’s competitive landscape. Last week Amazon launched AmazonSupply — a site where businesses can shop online from a list of more than half a million products ranging from toilet paper and industrial fasteners to hazmat gloves and laboratory supplies.

The new Amazon venture will compete with an array of existing players that supply businesses with the things they need to do business. Earlier this month, my colleague John MacAyeal posted in this blog space a piece about industrial supply wholesaler W.W. Grainger’s doubling down on its online sales channel. The company plans to invest $40 million over four years to beef up its ecommerce platform and site navigation technology. That seems like a prudent decision in light of Amazon’s entry into the same competitive space.

However, traditional distributors of industrial supplies aren’t the only ones who should be concerned. The vast selection of products on AmazonSupply could also pose a threat to the likes of Staples, Office Depot, Sam’s Club and Costco, as well as the top big-box home improvement centers, Home Depot and Lowe’s.

Amazon will lure business customers with perks like free shipping on orders over $50, credit for qualifying customers, an amazingly generous return policy, and phones that are manned Monday through Friday for customers who want to place their orders by more traditional means. And of course all of this will be offered at prices that are extremely competitive.

Amazon has already proven to be a formidable foe for brick & mortar retailers like Best Buy. The troubled electronics retailer has suffered from consumers’ tendency to window shop at Best Buy but make actual purchases on Amazon. This phenomenon shouldn’t be as much of a threat to the traditional industrial supply industry, as orders are usually placed by phone, fax, or online.

One selling point for companies like Grainger and MSC Industrial Direct is who, exactly, answers the phone when you call to place an order. Industrial supply distributors’ sales staffs typically have extensive knowledge of product specifications and other technical know-how that could be difficult for AmazonSupply to replicate. But that extra level of service is only relevant for a certain type of customer buying certain kinds of products. Technical expertise won’t be as much of an issue for simple items like janitorial and office supplies. But while wholesalers of industrial products and supplies still rely heavily on low-tech sales tools like landlines, fax machines, and  catalogs made from dead trees, industrial suppliers have been trying to move more business to their websites. However, so far Grainger and MSC only do about 25-30 percent of their business through ecommerce. I would be willing to bet that AmazonSupply will soon best those figures by a significant margin.

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Photo by Akira Ohgaki, used under a Creative Commons license.

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James Bryant

James Bryant is a writer and editor for the First Research team at Hoover's.

Read more articles by James Bryant.

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