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AmazonSupply

AmazonSupply
 

Research Question: Is AmazonSupply grabbing market share from existing MRO businesses?

Companies Covered: Amazon.com (AMZN) W.W Grainger (GWW), Fastenal Company (FAST), MSC Industrial Direct (MSM), WESCO (WCC), Applied Industrial Technologies (AIT), Alibaba Group

Report Available: Sept. 12, 2014

 

Blueshift’s initial research shows an increased amount of discussion regarding AmazonSupply’s foothold in the MRO industry, though traditional competitors are enhancing their competitive advantages and increasing strategic maneuvers to combat AmazonSupply’s ascent.

 

Observations

  1. Since its 2012 launch, AmazonSupply has grown its product offering from 500,000 items for sale to more than 2.2 million. Analysts estimate AmazonSupply revenue growing at the annual rate of 25% to 35%. Several industry experts and journalists are now calling AmazonSupply’s entrance into to the $469 billion MRO market “disruptive.” In May, Forbes published an article about AmazonSupply that shook the MRO industry and has been referred to as AmazonSupply’s “coming out party.” Job growth at AmazonSupply has recently increased as several marketing, branding, and publicity related openings likely signal an upcoming marketing campaign.  Amazon’s fulfillment and sophisticated pricing models will challenge distributors in all industry segments. AmazonSupply currently undercuts its competitors’ price by 25%, often selling at a loss in order to gain market share. In addition to low prices, strong fulfillment capabilities, and its e-commerce prowess, AmazonSupply simplifies the purchasing process for specialty industrial and scientific equipment which is often only available from specialist distributors.
  2. After the Forbes article claimed AmazonSupply was about to “slaughter” the MRO industry, many MRO executives began asking industry experts for competitive strategies to combat AmazonSupply. MRO businesses were advised to enhance their e-commerce platforms and fine-tune services AmazonSupply could not duplicate, such as providing product expertise and customized pricing and services.  Specialty wholesalers and distributors feel insulated from the giant’s claws due to their highly segmented market. Larger MRO companies like Grainger surmount AmazonSupply with respect to large customers, where customer service and convenience are top priorities. Any project that requires a service proposition such as job-site delivery, advice on product selection, physical inspection of the product before purchase, installation guidance, or ease of product returns remains a competitive advantage for traditional distributors. Outside of the traditional MRO market, AmazonSupply will face a formidable opponent in the near future as Alibaba enters the MRO race in the United States.
  3. Blueshift’s Dec 2013 report found that AmazonSupply was not taking share from incumbent leaders in the MRO sector, and was not yet a disruptive force. Just 3 of 16 procurement sources had used AmazonSupply and only one did so frequently. These findings were consistent with out May 2012 report where only two procurement sources had tried AmazonSupply and reported making less than 5% of their purchases on the website. They claimed AmazonSupply lacked expertise, part certification, and comparable support. However, most sources in the more recent report identified AmazonSupply’s strengths as its price points, strong e-commerce platform, and fulfillment reputation, especially with small to mid-sized businesses once it begins a marketing program to create awareness. This marked a change from the May 2012 report in which sources were largely uninterested in the site.

 

To assess whether AmazonSupply is finally beginning to take share from traditional businesses in the MRO sector, Blueshift will gather data and issue a market research report from independent sources in the following areas: large enterprise procurement professionals, small business procurement professionals, product supply chain, and industry specialists.

 

To see other ideas Blueshift Research is currently working on, please click here.