Doing Business Against An E-Commerce Giant

 

Amazon calls to mind a huge dinosaur in one of those “Jurassic Park” movies — those in the film pray the beast doesn’t turn its malevolent eyes on them and start charging. Distributors of jan/san supplies may be feeling as if they’re starting to draw this kind of unwanted attention from Amazon. And there’s some evidence that it could be a legitimate worry.

The reality is, when Amazon decides a particular market makes an attractive target, there is little that can be done to halt the invasion. Consider information provided by Jim Peduto, managing partner of Knowledgeworx, Endicott, New York. Peduto, who describes Amazon as a “master of logistics and customer convenience,” says the company is successfully adding commercial and institutional markets to its vast repertoire.

“Amazon now has more products in its business marketplace than on its consumer site,” says Peduto. “Their business has grown from $1 billion to $10 billion in annual sales in just three years. Not many distributors have that kind of growth or volume levels. The reach into traditional distributor markets is deep.”

How deep? Of the 100 largest educational facilities based on enrollment, 80 percent purchase supplies from Amazon. More than half of Fortune 100 companies, half of the 100 biggest hospital systems and over 40 percent of the largest local governments also do business with Amazon.

While Amazon is not yet a major competitor for Hillyard, Inc., St. Joseph, Missouri, it is a growing concern, says the company’s vice president of corporate distribution, Robb Ensign. He mentions an April 2019 interview with Jeff Bezos in “Quartz” where the Amazon leader says 58 percent of the company’s revenue is generated by third-party suppliers. This relationship with suppliers gives Amazon a financial advantage that could make encroachment into the distributor space less costly and easier.

“Amazon doesn’t have to own any of the inventory,” says Ensign. “Nor does it have the responsibility of becoming an expert for any of these third-party seller products. The platform allows for transactional pricing with a focus on logistics, rather than on subject matter expertise. That is left to the third-party providers to communicate.”

Amazon’s Weakness

For all of Amazon’s strengths, it still has a few deficiencies distributors can exploit. Consider Ensign’s observation about Amazon’s reliance on third-party expertise — a salesforce can contrast this using strong, consultative skills and a customer-service focus. 

“While logistics are important, and we attempt to meet or exceed the customer’s needs in this regard, we understand facility management professionals have budgets, balancing of workloads and providing clean environments as primary concerns,” says Ensign. (This) cannot be accomplished without putting the cleaning team in a position to execute their work efficiently, effectively and economically, and that takes more than world-class logistics. Product can be acquired anywhere, including from Amazon, but helping the organizations get clean, safe and healthy within their budgets is quite difficult. This is where we differentiate ourselves.”

A personal touch is something that, by its very nature, Amazon lacks. There’s just not really any interaction between customer and the company — most business is done behind screens. This lack of personability provides an in for distributors and might very well offer long-term protection — at least among their customers valuing that relationship.

Companies like Iowa-Des Moines Supply, Des Moines, Iowa, use their expertise and resources to pass on value to the consumer.

“In a nutshell, we have the product expertise, local warehousing, our own delivery trucks and personnel; we manage every aspect of the process, which saves the customer overall operating costs,” says Iowa-Des Moines Supply CEO Todd Weidmaier. “Combine this with the added value of our account managers providing inventory management and the customer experience should be hassle-free, which again equates to overall lower cost.” 

As such, Weidmaier says he’s not aware of any of the company’s full-scale business being lost to Amazon.

“We do see some foodservice operators experiment in e-commerce purchases, with limited success,” he says. “But we are typically able to compete head-to-head with these competitors, let alone if the customer factors the overall cost of procurement into the equation.”

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