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Wholesale Distribution becomes the Next Money Maker for Amazon?

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Lately, all the attention  has been focused on Amazon’s new TV-streaming device and expanding selection of Prime Instant TV and movies, however, the company has another money maker strategy up its sleeve…wholesale distribution.

Over the last decade, revenue growth for wholesale distributors has been above average. With revenue growth nearly 55 percent, compared to 40 percent for retailers, wholesale distribution may seem like another avenue of profit for many companies.  Computers, electrical goods, and machinery have been among the leading revenue categories for the wholesale sector.

E-commerce site AmazonSupply, which targets the lucrative business of wholesale and distribution, was originally launched in 2012.

When AmazonSupply — which is still listed as a beta product — went live, it had 500,000 different products for sale. It now has more than 2.2 million spanning 17 categories, including janitorial supplies, cutting tools, food service and groceries, and office supplies.

According to the most recent report of the U.S Census, U.S. retailers took in more than $4 trillion in revenues, wholesalers brought in $7.2 trillion selling everything from Bunsen burners to toner cartridges.

This is great for Amazon, especially compared to most of the other 35,000 wholesale distributors in the U.S., almost all of which are regional and family-run companies. W.W. Grainger, one of the biggest players in the wholesale space, controls 6% of the entire business-to-business market but has only 1.2 million products.

So, can AmazonSupply become a threat to distributors? According to the Electrical Distributor Magazine, the answer is yes. With Amazon’s functionality for the supply chain, distributors MUST maintain pace if they want to survive this development.

Going head to head with Amazon is a surefire way to come up short, which is why businesses cannot wait to make the necessary adjustments to an industry that constantly changes. Distributors may have had plans in place to improve their operations before AmazonSupply came along, but this development should signal that firms must be proactive to this news. Otherwise, that chain of small advantages will snowball into something greater – something that will be too difficult for companies overcome.

To read more on AmazonSupply and its potential competitors, click here.

By Lolita A. Alford

Are you exploring business options in wholesale distribution? Contact us to see how we can help!

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