Amazon Business is a Nominal Electrical Distributor Competitor


Interesting article in Electrical Wholesaling, “Amazon Business is Growing. Do Distributors Have a Plan” written by Unilog essentially saying you need to either join or fight Amazon Business because they are / will be taking over the distribution business (and since Unilog placed this article in EW, presumably they believe that the electrical channel is at risk.)

The article, based upon a proprietary survey that Unilog did to distributors (and they don’t mention the industries surveyed or the number of respondents in the article), states “33% of distributors felt that Amazon Business is the greatest threat to their business today”. 

The article further goes on to say:

  • While many see the threat, most are not prepared for it with 52% of respondents not having a plan for competing (and competing specifically against Amazon Business).
  • Distributors either need to compete against Amazon in eCommerce or partner and sell via the Amazon Business marketplace.
  • Amazon lacks domain expertise and customer history. Both which distributors have and should use.
  • Distributors need to invest in tech and data science.
  • Distributors must avoid becoming the low-price provider as can’t effectively compete
  • It’s critical to develop a strategy to compete against Amazon.

While white papers are typically designed as veiled sales pitches, the most informative are unbiased. An remember, Unilog sells development of product data and an eCommerce platform (and ideally as a package to distributors.)


The Amazon Business threat to electrical distributors is overrated.

Amazon Business, contrary to belief, is not going to take over the electrical distribution industry nor be the primary seller of electrical products.


  • Yes, Amazon Business is doing well over $10 billion, but that covers many different market segments. Electrical is only an element. They don’t share percent by category, but last year reportedly it was about $600 million for total electrical sales … not to the industrial / professional market (and yes, my wife uses cable ties for her art projects … ordered from Amazon Business.)
  • Talk to large MRO buyers. The ones that drive “your” business.  Ask them if they purchase technical products from Amazon.  Almost universally the answer is no.  They may buy MRO commodities (paper, office supplies, jansan items, some everyday tech products, etc).  The only technical items may be hard to find items.  Amazon Business knows this and is trying to find repetitively purchased items, however, MRO buyers usually need electrical materials “now.”
  • Talk to distributors and manufacturers who attend NAED meetings … they are tired of “Amazon bashing”.  The company isn’t going away.  Distributors survived Home Depot entering the pro market.  Customers who buy from Amazon buy from them for a reason. The issue for electrical distributors is to either understand why, recognize that maybe some of those customers have been / are costly to serve and to understand the need for serving customers however they choose to purchase / interact with them.
    • Perhaps this is one of the reasons that NAED has undertaken initiatives to better understand the contractor and industrial markets and will be sharing that research with the membership in the near future.  Recognition that Amazon is but one competitor and that its biggest contribution is uncovering that customers are willing to be self-service and wait two days for an order (by the way, distributors – ask your operations group what percent of orders from stock are delivered 100% within 36 hours? And then ask how much you charged for those order? (Remember, Amazon charges Prime memberships.)
  • Electrical buyer eCommerce research Channel Marketing Group conducted a year ago highlighted that electrical buyers go online to research, estimate and check inventory, not to buy.  Buying for MRO buyers occurs through punchouts and email. (We’re also considering updating the research and if you’d like to participate, let us know.) If you are an electrical distributor and want a FREE copy, email me (sorry manufacturers and service providers).
    • And Amazon is not the #1 place they were / are buying from.
  • And distributor research we did in late 2017, when the Amazon Supply / Business craze was higher, among industrial and construction trades, found “few see Amazon Business overtaking their industry.” We commented that “Amazon Business is NOT viewed as a major competitor today for everyday contractor / industrial products, especially items that are more technical in nature.”  So, has Amazon improved, distributors regressed in their eCommerce initiatives and customers migrated faster and desiring to do more “hunt and peck” on their computer?
  • Manufacturers report that, while their sales to / through Amazon Business have a very high growth rate (off of a low base), this channel to market is their most expensive channel.  The same could be true for distributors.
  • The electrical channel is one that continues to generate a good return and be a strong channel. Witness CED and Sonepar’s continued investment through acquisitions.  And yes, both also have eCommerce initiatives but they are focused on serving the customer, not focused on running scared from Amazon Business.  In fact, both count Amazon as customers, most probably through the construction of warehouses, office buildings and data centers. Perhaps manufacturers should ask about selling direct to Amazon for Amazon MRO purchases?
  • And a little $10 billion company by the name of Grainger that has about $2 billion in electrical sales? They’ve competed very well with Amazon Business for their core offering and, more importantly, at their core customers. And their offering and value proposition is more akin to the offering of electrical distributors. And in their recent end of year analyst call they reference that Amazon and they essentially compete differently.
  • Amazon Business can potentially face a formidable competitor in manufacturer reps. While it has much data, it doesn’t provide it discretely enough to manufacturers to enable POS reporting and compensation to their reps. If electrical sales significantly migrate to Amazon, these customers will find manufacturer reps not calling on them to support their pre-sale or post-sale needs … and manufacturers cannot handle the customer service issues unless it will be all online. Alternatively, manufacturers would need to consider different compensation models.
  • Amazon, in reality, has many more opportunities to focus on than the electrical industry. They’ll take what they can get, but they recently announced the launch / expansion of their grocery business, introduced Amazon Day and continue to invest in AWS.
    • There are more prevalent electrical competitors … Grainger, Automation Direct, Fastenal, McMaster Carr, and plenty of niche sites, let alone national chains and other “local” competitors.
    • And competition is defined, hopefully, by more than just the product they sell. Your services are your value proposition and integrate with your relationships and inventory investment to define your competitors and competitive positioning.

Distributors don’t need a plan to defend or compete against Amazon Business.  They need a plan for their business.  To grow the top line and/or to grow their bottom line. It’s based upon their specific goals. Amazon is but one competitor. The key in developing a plan is focusing on your customer, understanding their needs, delivering on those needs and anticipating future needs.

If Amazon is part of your plan, great. We know companies that have been successful selling through them, others who have tried and could sell a dime and others who have a good year and then the business tails off.  It’s like anything … it needs to be resourced and worked.

Much can be learned from them, but they don’t need to be feared.

And if Amazon is not part of your plan, the question is, what is your online plan to serve your customers … which needs to be based upon their needs.  And inevitably, unless you are running an online only business, needs to be omnichannel / multiple points of contact.

Investing in technology is a given. Many distributors have invested in more technology outside of their ERP system to leverage the data in those systems and convert that data into information and action.  Websites are an important element of your technology platform equation, although invest appropriately.  They are like boats … you will always be investing into them and will inevitably always upgrade as your resources grow.

Keep your eye focused on the ball (your customer). Know the competitive landscape and drive forward.

Want to learn more about what your customers are thinking … and thinking about “e”? Give us a call.

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1 thought on “Amazon Business is a Nominal Electrical Distributor Competitor”

  1. I totally agree with your position regarding the “Amazon threat”. The sky is not falling, Amazon is not some mythical beast and nobody ever grew their business by being scared of competition.

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