Melanie Lichtfeld, owner of a Madison, Wisconsin plumbing firm, used to inform customers they would have to wait weeks to purchase their brand new kitchen sink from a local supplier. She orders the parts she needs on Amazon.com and they arrive two days later. Ms Lichtfeld is one of an increasing number of general and emergency plumbers, electricians and other contractors beginning to purchase industrial parts online for things like an appliance repair service. Included in its business-to-business marketplace offering, Amazon.com now sells everything from light switches to hydraulic valves, and last month boasted it had one million clients throughout fields that also included office and healthcare supplies.
Amazon is joining a plethora of online sellers shaking up the approximately $US130 billion ($164bn) US market for things that keep factories humming along with the plumbing working. They threaten a company largely still conducted via salespeople working from local stores and national distributors that cater to big companies, as customers are lured away with immediate comparison shopping and free shipping. The biggest industrial supplier in North America, W.W. Grainger, with sales topping $US10bn yearly, said it cut costs by up to 25 percent this year following years of losing customers to cheaper online competitors.
MSC Industrial Direct, a major provider to metalworkers, is printing fewer copies of a 4500-page catalog it calls The Big Book. The company now generates about 60 percent of its earnings electronically, from 41 percent five decades back, including vending machines installed on factory floors that mechanically order refills. Online sellers’ push into the marketplace has nabbed a lot of the business’s sales growth, analysts say, and sparked concern about the future of traditional providers. Ms Lichtfeld said Madison’s local providers had ceased carrying many things easily found online. She also began selling spare parts on Amazon.
While parts accounted for a sliver of Amazon’s $US136bn in earnings this past year, the business is an established disrupter of industries ranging from apparel to video to private cloud computing and data support services. Like retailers before them, industrial providers risk getting caught in a race to the bottom on costs, where online-only sellers have an edge because they do not maintain expensive networks of branch offices and salespeople. Deane Dray, an RBC analyst, said you don’t need a specialty salesperson to purchase cleaners or a mop.
Amazon is shaking up the conventional format for selling industrial components by allowing manufacturers and sellers to market products directly to companies on its market, eliminating middlemen and often undercutting traditional regional suppliers. Additionally, it supplies straightforward ordering and transparent pricing, characteristics which are the standard in online retail but less common in the industrial world. Customers just desire the Amazon buying experience at work, according to Prentis Wilson, vice-president of Amazon Business, which was launched in 2015.
He said many customers made one-time “place” orders for components, but Amazon is converting some larger companies to handle their shopping on the market. Shon Altbaier-Meere, the owner of a Mason, Ohio, home building and remodelling company, said she’d used her private Amazon account to get supplies. She also buys parts on other websites she finds through Google’s comparison-shopping support. She said she doesn’t have time throughout the day, she wants to be on the job. She will put the kids to bed at 9pm and begin searching for burst pipe and plumbing fixtures in her pyjamas. Big customers, including producers and government agencies, are where vendors like Grainger make most of their cash. Sales to those buyers were still growing, but spot purchase volumes are down.
Some distributors have a head start on Amazon. Several have provided next-day delivery for essential parts for decades and are specialists in fulfilling requests quickly from warehouses across the country. Even smaller companies like United Electric Supply are incorporating services such as order tracking, same-day shipping and other IT support solutions and services. The industry was just not going to let someone come in and take our company without a great fight, according to chief executive George Vorwick.
Costco to go online as rival Amazon prepares to enter Aussie Industry
Ahead of Amazon’s entry into Australia, Costco is constructing among the largest warehouses in the country to start online shopping. The gigantic site on the Oakdale Estate near Horsley Park in Sydney is subject to a development program and will be used to distribute to existing warehouses and Costco.com.au. Managing Director of Costco Austalia Patrick Noone said they utilize their distribution centers around the world to do that, so that would be something we’d be looking ahead to use that website for.
With Amazon coming to Australia offering cheap rates and high-speed shipping, Costco’s move online is a potential game-changer. The retail giant started online in the US nine years back. Big three or four-door fridges online that you can buy and have delivered to your house, along with guaranteed fridge repair if need be, whereas at the warehouse we cannot carry them all year round, Mr Noone said. Costco online is expected to begin in 18 months’ time after the warehouse is constructed and stocked.