In 2015 Amazon Business launched in the US, aiming to do for B2B what it had already perfected for ordinary customers. By 2018 it was live in eight countries including the UK, France, Germany, Japan and India, sending alarm bells ringing at established distributors and retailers in everything from office products to medical supplies.

The emergence of Amazon’s B2B offering has the potential to reinvent known industry standards and lift customer expectations, potentially leaving existing players behind through a combination of leading CX and network scale. But what does it mean for the global and rapidly growing B2B electronic components market, with a value in the hundreds of billions and growing, driven by ever-increasing demand for smartphones, laptops and more? In disrupting the market, could Amazon Business sound the death knell for existing players – even threatening the top five: Avnet, Arrow Electronics, WPG holdings, RS Components and Future Electronics Inc, who between them boast over 80% of the market share?

Amazon Business vs the established players
Amazon has scale and familiarity. It provides a state-of-the art ecommerce experience. The ethos of its consumer site is, according to Jeff Bezos, ‘Low prices, fast delivery, and vast selection’, a set of priorities likely to appeal to engineers and purchasing professionals the world over. What Amazon Business doesn’t have currently is decades of experience in this complex and extremely specialist sector. Nor does it provide the valuable services offered by existing players: technical and compliance support, product design and learning resources, inventory management, advice on component selection, even live access to engineers. All of this mitigates risk, and at the moment, Amazon don’t provide it.

In an article for Michael Knight, senior vice president at TTI talks about this, saying that the ‘environment is very chaotic and sales support requirements are knowledge and relationship intensive.’ However, he also wonders ‘Will big data, M2M and application programming interface one day pull everything together and make the supply chain more virtual, predictable and accurate, lessening the need for human knowledge, relationships and intervention?’ If this comes to be, the outlook could look distinctly stormy for suppliers selling in volumes that mean they don’t currently see Amazon Business as a serious threat.

The biggest players in distributing electronic components are currently somewhat protected from Amazon Business because they supply heavily customised products at a scale that the latter can’t, at the moment, replicate. But they shouldn’t be too complacent. Though the percentage of components sold through online marketplaces like Amazon Business is relatively small at present, in the long term it’s a serious threat. Amazon is known for its incremental enhancements in terms of products and services and for instance in selling electronic components it may have started with the easier targets of standardised and passive products but it could only be a matter of time before it scales up to customised products. In addition, the standard products they’re currently selling still represent a proportion of business nobody wants to lose. In future the veterans may have to create their own marketplace models in order to compete.

Of course, some smaller distributors may decide themselves to sell on Amazon Business, seeing an opportunity to gain access to a bigger market and taking advantage of its brand in terms of the customer experience. But this will cut into their margins, they will lose their relationship with the customer, and there’s always the possibility this could happen to the point where it kills off their business entirely. There’s also the possibility that manufacturers might list on Amazon themselves, though only if there were thought to be tangible benefits to doing so, when the likelihood is they would have to expand their capabilities in terms of managing supply chains while seeing a cut in profits because of Amazon’s fees – not a tempting proposition.

One of the key advantages that traditional players have at present is their reputation in, and commitment to, quality and authenticity. Electronics distributors have authorised relationships with manufacturers. They are specialists with robust processes in place in terms of supply chains and quality assurance, working in an industry where counterfeit products are a significant problem. Though Amazon have and no doubt continue to develop their own processes, they are up against competitors with decades of experience in a highly specialised market. Buying from Amazon Business as opposed to established companies and manufacturers could potentially add a level of risk that just isn’t worth a slightly lower price per unit. Only time will tell how much of a handicap this will prove, or whether Amazon will announce its own authorised relationships and swallow the market whole.

Established businesses must continue to add value and ease to ecommerce
In the short to medium term, established businesses must play to their strengths and focus on the customer experience. This means accentuating the levels of expertise and added value that makes them unique as well as elevating the shopping experience.

Industry veterans need to closely analysis Amazon Business’s ecommerce, taking note of its many elements of best practice and applying them to their own sites. For example, sign up and checkout have easy-to-digest forms and journeys, stepped over several pages. The user is kept informed of progress and expectations so they never feel overwhelmed. Though Amazon Business doesn’t yet support having a bill of materials, there is useful additional functionality in the wish list, shopping cart and checkout process over and above its competitors.

Turning our attention to product sections, supporting content and recommended products should be tailored to the user. Support should be provided on demand, with tool tips to answer questions and solve problems in context, and live expert support on product pages as well as persistent help and contact links. Social proof, including best selling items, reviews and testimonials, is another behavioural nudge that Amazon is known for. Existing distributors and retailers need to do all this and more, providing an effortless, personalised and dependable experience and going above and beyond what Amazon are doing. It’s important that they prove their worth and relevance in a market which is only going to get more competitive.

In the long term, electronic components businesses will need to have a robust vision and plan in place to stay competitive. This means paying close attention to omni-channel strategy and potentially transforming business models to reflect changing expectations in the B2B market. The ones that can act decisively and put holistic strategies in place to ward off the threat posed by Amazon Business will be the survivors. The rest may find themselves as obsolete as an old cathode ray tube.

Find out more about The BIO Agency’s transformation of online business for Arrow Electronics.

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