Relationships between most buyers/facilities and industrial distributors are built over time. From my experiences, the suppliers utilized have often been used by the facility predating many of the employees there. The relationships in place have worked for years. Why tamper with something that isn’t necessarily broken? Also doing something different will most likely require additional time or effort further causing resistance. I’ve had difficulty managing the transition between like-for-like established distributors (i.e.: Grainger to MSC or vice versa). There’s a lot that goes into the transition process from correctly and updating the ERP system to flagging down non-compliance and illustrating lost savings or missed opportunity. Now imagine trying to tell someone who uses one of these top MRO distributors they now will be purchasing from Amazon Business. Top tier industrial supplies distributors have entire teams that focus on implementation and change management. This is relatively unchartered territory for Amazon Business who relies heavily on ease of ordering through their platform.
What Amazon fails to realize is that industrial suppliers embed themselves through the personal touch and there is more to a supplier relationship than just the simple exchange of currency for goods. Generally speaking, the facility has a representative from their industrial supplies distributor who makes site visits at minimum once a week. From the distributor’s perspective this serves multiple purposes. It creates a presence and allows the distributor to continuously market themselves on an ongoing basis. Their physical presence allows the facility to directly express their needs in person and allows the distributor an opportunity to upsell. Not only this, but larger accounts are tagged with an Account Manager who works with the account holistically to ensure set pricing, keep contracts updated, and make sure all facilities are happy with the service levels provided. The continued in-person dialogue ultimately creates a lasting relationship, putting a name and a face to the supplier that makes leaving the supplier more difficult and even more so when the switch is to an organization with no name and no face, just an online portal.
Top distributors also ensure products are purchased through them by providing vendor managed inventory (VMI) and/or vending machines. Essentially, the facility gets value adds like inventory control, auto replenishment, and on-demand purchasing while the distributor gets the assurance that all these products are purchased through them. Again something Amazon Business doesn’t really offer and something top MRO distributors utilize to create stickiness, making it increasingly more difficult for the facility to transition.
From my perspective within the MRO space, Amazon Business will primarily be utilized by smaller organizations and contractors. In order for Amazon Business to be taken seriously by larger organizations, at least for MRO, they will need to not only establish themselves from a pure pricing and product line standpoint but also adjust their business model to ensure purchasing activity and address the service side of things. MRO historically has been relationship driven and I see this as a big miss from Amazon Business.