AmazonSupply and the Jansan Industry

by Michael Wilson — A quick search for “Amazon news” brings up a number of hot-off-the-press items about the mega retailer, mostly regarding its new smartphone, a Netflix-styled book service the company is considering, and its row with traditional publishing companies on charges and royalties. However, one news item that does not pop up, at least not in the top items reported, is something that may have considerable impact on the jansan and many other B2B industries, and that is AmazonSupply.

What is AmazonSupply

AmazonSupply is targeted at the huge distribution market. According to Amazon, the goal of this service (and most likely Amazon itself) “is to supply everything needed to rebuild civilization.” AmazonSupply is, as you might assume, an online e-commerce site similar to the one that already made it famous. It supplies everything from “industrial motors, flanges, fasteners, materials, [and] janitorial supplies” and more, according to Jeff Bezos, who has, as of May 2014, referenced the strategy only once publicly, at the company’s 2012 annual meeting.

AmazonSupply was launched quietly in April 2012 with about 500,000 items for sale. As of print time, the site offers more than 2 million products in 17 product categories. However, Bezos has continued to be very quiet about the project so no one is quite sure if AmazonSupply is moving forward. Some speculate that Bezos is waiting to make a big announcement when the time is most appropriate, or perhaps he simply does not think that the B2B industry is exciting enough to play up AmazonSupply.

But the following shows why Amazon is so interested in entering the distribution market:

  • The market is selling about US$7 trillion dollars’ worth of products, everything from parts for stoves to printer cartridges.
  • Of the 35,000 distributors in the United States, most are small, regional, and family-run companies.
  • Only about 160 of these North American distributors make more than $1 billion annually, 74 times less than Amazon booked in 2013.

Just as Amazon has been relatively quiet about AmazonSupply, so has it been about how well the site is doing or which industries it is most impacting. However, according to Richard Balaban, a senior partner of Oliver Wyman, that focuses on strategy, strategic planning, and industrial and B2B businesses, “The question is not whether AmazonSupply will be a threat … [but] rather which customers, purchase occasions, and categories will be attacked first.”

AmazonSupply’s Strengths

One of AmazonSupply’s biggest strengths is that it already has many distribution centers. In the United States alone, AmazonSupply stores and distributes products from all of Amazon’s 40 fulfillment centers and reportedly stocks at least 50 percent or more of the products it offers on its website.

Why is this important? Fast delivery. Some big e-commerce retailers try not to stock products that are slow movers. This means that if they get an order for a rarely purchased product, these companies must first place an order with the manufacturer, then perhaps have it delivered to their distribution center before it can be sent on to the customer. These extra steps have been eliminated at AmazonSupply because the company is willing to stock these products even if takes some time to sell them.

Another Amazon.com strength is that the company was started in July 1994 and has been improving its online marketing prowess for 20 years now; it is often considered the best online marketer to date. This means it has all the technology and technology experience necessary to present videos, download drawings, and provide information on these industrial products in scores of different ways—all of which have proven to be excellent marketing tools.

Finally, because of Amazon’s scale, AmazonSupply may be able to offer products at a lower price than some other online retailers. While, as mentioned it is willing to stock slow-moving products the bulk of the product line consists of fast-selling items with very thin profit margins. One consulting company said it found prices on some AmazonSupply items about 25 percent lower than others marketed online or in more traditional brick-and-mortar outlets.

Impact

It should be noted that Amazon is not the first major company to enter the B2B market and, specifically, the professional cleaning industry. More than a decade ago, a major office product retailer also tried to enter the jansan market, creating a separate website catering to the janitorial needs of contract cleaners and end customers, such as facility managers. Finding the industry a bit more difficult to enter than anticipated, the company backed off after a couple of years and merged the separate website marketing janitorial products into the company’s main website.

While this attempt failed, it appears Amazon may have more staying power than the aforementioned retailer. And to think that AmazonSupply will not impact jansan distributors in the coming years would likely be folly.

“Distributors have to realize Amazon is huge….at this point the company is actually bigger than Wal-Mart,” says David Frank, a leading speaker for the professional cleaning industry and president of the American Institute for Cleaning Sciences. “When Amazon enters a market, there is no way it is not going to have an impact on that market and other players already in that market.” Frank also points out that Amazon has been expanding it fulfillments centers dramatically in the past few years, having gone from about 13 million square feet in 2009 to an estimated 47 million square feet by 2016.

“These fulfillment centers are all being built within 100 to 200 miles of major metropolitan areas,” Frank says. “Amazon’s goal, it appears, is to be able to carry just about anything a customer might want and be able to deliver it within a day or two.”

AmazonSupply & BSCs

AmazonSupply selling in the B2B marketplace certainly has some distributors on edge. Yet pricing for products and equipment could become more competitive and transparent and some building service contractors (BSCs) may benefit from greater convenience and faster delivery. What is likely to be missing, however, is the personal touch.

Professional cleaning work is performed by people and often requires personal assistance, including training, from suppliers with first-hand industry and product knowledge. Most jansan distributors today realize their role is no longer to be a “product pusher,” but rather, to be an educator, consultant, and advisor to their customers, and AmazonSupply could actually help reinforce these roles.

As with all changes, while there may be some rough spots during the transition, ultimately the introduction of online B2B marketplaces will likely be a plus for most segments of the professional cleaning industry.

Survival Tactics

The biggest strengths jansan distributors have on their side is what has helped them weather other marketing storms over the past 20 years, and that is add-ons, first-hand and personal service, product knowledge, and strength in numbers.

As far as we know, AmazonSupply does plan on not sending representatives to facilities using web-based dashboard systems to inventory their current products and then recommending other products that might be greener, more sustainable, less costly, more effective, and so on. This takes a hands-on approach from a distributor willing to spend time with its clients to address its specific needs. Similarly, AmazonSupply is not likely to send trainers to facilities to help train custodial workers in how to use the products just delivered or how to workload their activities to work more efficiently and help reduce labor costs.

The other strength jansan distributors have is that they do not necessarily have to go it alone. Yes, the industry is made up of scores of mom-and-pop operations, but many of these small distributorships are parts of buying or marketing groups. Working independently but within these groups, some are already able to offer end customers the fast delivery speed and efficiencies of online ordering along with the add-on personal services just mentioned. Similarly, distributors can turn to ISSA for ways, such as the association’s free-to-members Value of Clean toolkit (www.issa.com/value) and programs such as the ISSA Certification Expert program.

While AmazonSupply’s entering the market will no doubt make an impact, astute jansan distributors will likely be able to adjust and address this change in our industry just as they have been able to in the past.

Michael Wilson is marketing director and project manager for afflink, a sales and marketing organization that partners with distributors nationwide. He may be reached through his company website at www.afflink.com.

Copyright by ISSA®

ISSA Today is published by ISSA, the leading trade association for the global cleaning industry. ISSA has a vast membership that includes distributors, manufacturers, manufacturer representatives, building service contractors, in-house service providers, and associated service members. ISSA offers the industry’s largest cleaning shows, the popular website ISSA.com, educational products, industry standards, periodicals, and legislative and regulatory services that specifically focus on the professional cleaning industry.

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