Amazon Enters Wholesale: What You Need to Know

By
Michael Elmgreen
May 16, 2014

In a fascinating Forbes Magazine investigative piece entitled “Amazon’s Wholesale Slaughter,” Claire O’Connor describes Amazon’s recent (and stealthy) foray into the world of wholesale commerce with its Amazon wholesale portal, AmazonSupply. According to O'Connor, AmazonSupply “has the potential to turn into the most important development in the company’s history since it started selling books." Will they be successful? What does this mean for wholesalers, distributors and sales reps? Here are our thoughts on the article...

Amazon Wholesale Highlights:

- Amazon has launched AmazonSupply, a B2B-only eCommerce marketplace but has been relatively silent about the launch thus far. - AmazonSupply currently has 2.2 million products for sale across a wide range of categories. - Amazon is hiring aggressively to staff AmazonSupply in key job categories including “brand specialists” who’ll be expected to become experts on the tools of the trade for a particular wholesale customer. - Amazon is using current-generation product presentation technologies to offset the need for human sales processes and explanation, including the ability to show off products in Web videos, post downloadable CAD drawings and draw from user reviews. - Amazon appears willing to take inventory risk on products that sell in relatively small volume. - One major competitor to AmazonSupply is W.W. Grainger, who make 33% of their revenue online, but also sell through a network of 700 regional sales branches and 33 distribution centers. - It is unclear whether Amazon will attempt to enter the wholesale marketplace for unwieldy, hazardous or other products that are difficult to store and ship. - Some businesses are responding by diversifying to include additional value added services to their offerings.

Quotes from the article:

- “...Our target customers differ significantly from how online-only retailers serve the market.” - Spokesperson for W.W. Grainger. - “The question is not whether AmazonSupply will be a threat. Rather it is which customers, purchase occasions and categories will be attacked first.” Richard Balaban, who is studying AmazonSupply for a management consulting firm. - “It’s a very consistent message, versus 500 different sales reps.” - Vice President of B2B and AmazonSupply Prentis Wilson. - "We are comfortable planting seeds and waiting for them to grow into trees,” - Amazon CEO, Jeff Bezos in 2012. 

What could this mean for the wholesale industry?

- Amazon is likely launching this offering in response to the news of Alibaba’s impending IPO. - If Amazon is successful in replicating their success in consumer eCommerce, B2B purchasing online may become commonplace, possibly altering buyer behavior and taking a share of sales away from other direct channels. Online marketing of wholesale products will become significantly more important. - Brands and distributors will move more aggressively to provide customer friendly order buying experiences for their customers online and to will work to grow their understanding of key customer and sales data. - If AmazonSupply achieves meaningful scale and buying power, this could possibly result in some margin compression for suppliers, forcing companies to invest more in direct online sales and fulfillment channels in response. - While the needle will undoubtedly move more towards efficient, lower-touch sales processes, at Handshake we believe that one of the primary things that differentiates B2B from B2C trade is a fundamental bedrock of relationship-driven selling, due to the size of the purchases and the inventory risk that the retailer is taking on the products they resell. Leave your opinion in the comments:

What do you think about Amazon's entry into the wholesale market?

Do wholesale buyers want to buy online?

Is the Amazon Wholesale marketplace a good or bad thing for the industry?