Canadian Electrical Wholesaler

Amazon SupplyDavid Gordon and Allan Ray

For the past couple of years, electrical distribution has heard that Amazon Supply will “disintermediate" the industry. Contractors and MRO users will flock to where they buy their books and other consumer goods to purchase their electrical materials. And suppliers will sell to Amazon Supply directly, enabling Amazon Supply to “provide better value” (read “undercut market pricing”).

And everyone will be happy “hunting and pecking” for the items they need… and will be happy to wait until tomorrow, pay upfront, manage their own delivery schedule and… Oh, and they’ll never have a question.

But at the same time, companies like Grainger and MSC report increasing online sales and we’re undergoing a shift in business dynamics to a more connected, electronic workplace where people are more comfortable using technology as well as being open to being self-sufficient.

Omni-channel rules

We’re not saying that Amazon Supply will fail, because it is doubtful that it will. We’re not saying eCommerce is not necessary, because it is. What we are saying is that you need to be responsive to your customers and offer them all the options to do business with you so that you can maximize your sales opportunities.

And orders placed online can be more profitable for a distributor (but that’s a future discussion).

The concept of omni-channel is that you provide your customers with multiple ways to order from you. They choose what is right for them at that moment in time.

Consider your sales channels:

• your outside sales organization
• your counter salespeople where a customer can visit you
• your inside salespeople where customers can call and place an order; or they can ask the same person questions about material as well as service
• your specialists (e.g., lighting, gear, control/automation, software, etc.)
• your website
• your mobile site (tablet or smartphone)
• your emergency service / after-hours number
• and you may even have a call center

Omni-channel refers to serving the customer the way they want to be serviced. This is one of the reasons why Grainger is successful.

Additionally, online is great for buying, not necessarily for shopping. Most people go online when they know what they want, not for when they have questions or have “complicated” orders.

As a distributor, you specialize in answering questions (service) and managing complicated issues (projects). Opening up your sales channels and maximizing the marketing of them can generate incremental sales opportunities.

Understanding Amazon Supply

In the November issue of Canadian Electrical Wholesaler we asked whether Amazon Supply could compete with traditional distributors by using traditional distributors’ inventory to serve MRO and contractor needs (yes, there are distributors enabling Amazon Supply in an effort to generate immediate sales). But remember, the expectations of these two types of buyers can differ.

Earlier this fall we heard of a few projects in the U.S. that Amazon Supply “quoted” and “fulfilled.”

This is one contractor’s experience.

A contractor’s project experience

A building owner, for some reason, wanted the general contractor to have the electrical and mechanical contractor quote the project via Amazon Supply and then award the business to Amazon Supply. The GC offered to pay the contractor for any excessive time efforts, if incurred, for purchasing from Amazon Supply.

The contractor received local bids as well as one through Amazon Supply. For Amazon Supply he used their website, chat and finally spoke to someone at Amazon Supply.

From using the site he learned that Amazon Supply is designed for ordering individual line items, not project quantities. Additionally, freight was a significant issue (he did not sign-up for Amazon Prime to receive free shipping nor did Amazon recommend this.)

He identified as many of the items, or acceptable substitutes, as he could. The Amazon Supply database, however, was lacking in information (the type you need for projects… like submittals) for many items that the contractor needed. There was back and forth and Amazon Supply attempted to gather needed information and prices from electrical distributors. Some cooperated, others did not.

Meanwhile, the contractor still reached out to local distributors for wire, conduit and selected other material. Switchgear was not an issue as the “specified” brand was available via Amazon Supply, albeit through a distributor.

“Time consuming” was a term the contractor used in thinking about the process for his customer. One can only imagine what he billed the GC for excess time (or should have).

While the bill of material was ordered from Amazon Supply, what happened in the background was that orders were fulfilled from Amazon Supply’s stock or ordered from another source(s). As a contractor, knowing where material comes from is important if you have to return items, unless you have a friendly distributor who takes back others’ materials as long as they stock the line. Visualize wall switches or plates coming from three different sources.

Billing from Amazon Supply is upon ordering and either the contractor needed to pay via credit card or arrange a line of credit from Amazon Supply.

And consider getting same day material for change orders… not going to happen.

But delivery came when expected. However, UPS will not bring it to floors on construction sites. You know who had to.

Have contractors ever returned material after a project?

The contractor finished the project and had some overage that he needed to return. Standard practice when working with a distributor.

Not a problem. the contractor contacted Amazon Supply to arrange a return, and Amazon Supply willingly offered to pay the freight.

Now here’s the fun part.

The contractor had to pack the material, contact the shipping company and arrange for pick-up. Since the material was on the job site, the contractor had to drive it to the shipper or take it back to their office for a UPS pick-up.

The return also became confusing as Amazon Supply wanted the contractor to segment the return material based upon the distributor that the material came from… over 60 different distributors! The contractor refused, but still had to do some of the work to get his money back. The majority of the return went to an Amazon Supply facility in Las Vegas.

If the building owner had not paid the difference, the electrical would have been 12% more expensive than purchasing from a local distributor.

Conclusion

Projects are not a strength for Amazon Supply and, quite frankly, probably any online ordering system. This is an example where human interaction would have benefited the customer, hence an omni-channel approach.

A recent article in the Wall Street Journal entitled, “A Bend in Amazon’s Online River,” stated “retailers with a physical presence and service options close to where their customers live will often have natural advantages over pure Internet players.” And then it referenced how Home Depot will have an advantage over Amazon that Amazon can only counter with price (but may also be why Amazon is building warehouses closer to customers.)

It’s all about understanding customer needs and providing them with choice. But as a distributor you need to offer the choice and communicate that you can address their needs.

Oh, and remember the part of Amazon Supply putting distributors out of business? Amazon started selling online in 1995. Twenty years later, e-commerce in the US is only 6.6% of overall sales and Amazon is 18% of this. It takes time to break a habit. 

David Gordon is president of Channel Marketing Group. Channel Marketing Group helps manufacturers and distributors accelerate sales generation and gain insights through channel strategy, marketing planning and market research initiatives. He can be reached at 919.488.8635 or This email address is being protected from spambots. You need JavaScript enabled to view it..

Allen Ray is president of Allen Ray Associates Ltd. Allen is a veteran distribution consultant. He has helped manufacturers, distributors, business system developers and business data providers grow their productivity and businesses. He can be reached at 817.271.0236 or This email address is being protected from spambots. You need JavaScript enabled to view it..

Visit their industry blog at www.electricaltrends.com for more ideas and insights into profitably growing your business.

 

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