Many electronics buyers and distributors are keeping a watchful eye on Amazon.com after the Internet-based retailer announced earlier in the year it had established its Amazon Business division.
The BTB site is selling a variety of business-related products, including electronic components. Many distributors wonder to what degree Amazon’s efforts to expand into components will affect distribution and the electronics supply chain in general.
Some say it could affect non-franchised independent distributors and parts brokers the most. Some independents may compete with Amazon, while others may list parts on Amazon’s site.
Others say it may have an impact on distributors that sell parts in small quantities to engineers who are designing new products. Rather than buying parts from catalog and other authorized distributors, an engineer may opt to purchase from Amazon.com.
On the other hand, some distribution executives doubt Amazon will have any significant impact on distribution—at least in the short term, because distributors provide much more value to customers.
Although Amazon is big and the dominant force in the online selling of books, household goods, clothing, and other merchandise, its business model is different from authorized distribution. Distributors not only have large inventories of components, but they provide original equipment manufacturers (OEMs) and electronics manufacturing services (EMS) provider customers with a plethora of value added, supply chain, and design services that help customers avoid and mitigate risk and reduce total cost.
Distributors also provide value by being an important source for market intelligence for OEMs and EMS providers. Distributors have a unique position in the middle of the supply chain and can identify emerging demand trends for parts and end equipment.
For suppliers, distributors often create demand for their new products, and many have field application engineers to provide needed technical advice about new components to OEMs.
Because of the value distributors provide to component manufacturers and customers, distributors have become integral to the electronics industry. Amazon’s model appears to be focused on taking orders and shipping parts.
There is also a question about the origin of the parts that Amazon sells.
“I would think that very little, if any, product Amazon is selling actually comes from Amazon itself, but from resellers,” said one distribution executive. If parts are coming from a reseller such as an independent distributor, then traceability of the parts could be an issue. If the origin of parts can’t be identified, responsible buyers will not purchase them because of the risk that the parts could be counterfeit or substandard.
Without traceability, engineers may be reluctant to buy components from Amazon because, if a part is defective, it could cause a newly designed product to fail in testing and delay introduction of the new product.
Still, Amazon is likely to find a niche in the supply chain. While it may not be the first choice for purchasers, many buyers may use the site when components are in short supply and they cannot buy parts from authorized distributors or directly from component manufacturers. Amazon may also be useful to buyers looking to find obsolete parts or parts that are mature, but not yet obsolete.
Amazon’s BTB model could evolve over time, and the company may attempt to create more value for customers by adding services. If that happens, distributors will need to find ways to provide even more value for customers.
As an executive for one large broad-line distributor told me: “if you don’t provide more value to your customers, then you are done. Amazon will eat your lunch.”