Executive Briefings

Parts Suppliers Take a Hit From the Amazon Effect

Melanie Lichtfeld, owner of a Madison, Wis.-based plumbing company, used to tell customers they could wait weeks to buy their new kitchen sink from a local supplier. Now she orders the parts she needs on Amazon.com and they arrive two days later.

Parts Suppliers Take a Hit From the Amazon Effect

Lichtfeld is one of a growing number of plumbers, electricians and other contractors starting to buy industrial parts online. As part of its business-to-business marketplace offering, Amazon.com Inc. now sells everything from light switches to hydraulic valves, and last month boasted it had one million customers across fields that also included health-care and office supplies.

Amazon is joining a host of online sellers shaking up the roughly $130bn U.S. market for items that keep factories humming and the plumbing working. They threaten a business largely still conducted via salespeople working out of local shops and national distributors that cater to large businesses, as customers are lured away with instant comparison shopping and free delivery.

The largest industrial supplier in North America, W.W. Grainger Inc., with sales topping $10bn annually, said it cut prices by up to 25 percent this summer after years of losing customers to cheaper online competitors.

MSC Industrial Direct Co., a leading supplier to metalworkers, is printing fewer copies of a 4,500-page catalog it calls “The Big Book.” The company now generates about 60 percent of its sales electronically, from 41 percent five years ago, including vending machines installed on factory floors that automatically order refills.

Online sellers’ push into the market has nabbed much of the industry’s sales growth, analysts say, and sparked concern about the future of traditional suppliers. Lichtfeld said Madison’s local suppliers have stopped carrying many items easily found online. She also started selling spare parts on Amazon.

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Lichtfeld is one of a growing number of plumbers, electricians and other contractors starting to buy industrial parts online. As part of its business-to-business marketplace offering, Amazon.com Inc. now sells everything from light switches to hydraulic valves, and last month boasted it had one million customers across fields that also included health-care and office supplies.

Amazon is joining a host of online sellers shaking up the roughly $130bn U.S. market for items that keep factories humming and the plumbing working. They threaten a business largely still conducted via salespeople working out of local shops and national distributors that cater to large businesses, as customers are lured away with instant comparison shopping and free delivery.

The largest industrial supplier in North America, W.W. Grainger Inc., with sales topping $10bn annually, said it cut prices by up to 25 percent this summer after years of losing customers to cheaper online competitors.

MSC Industrial Direct Co., a leading supplier to metalworkers, is printing fewer copies of a 4,500-page catalog it calls “The Big Book.” The company now generates about 60 percent of its sales electronically, from 41 percent five years ago, including vending machines installed on factory floors that automatically order refills.

Online sellers’ push into the market has nabbed much of the industry’s sales growth, analysts say, and sparked concern about the future of traditional suppliers. Lichtfeld said Madison’s local suppliers have stopped carrying many items easily found online. She also started selling spare parts on Amazon.

Read Full Article

Parts Suppliers Take a Hit From the Amazon Effect