Amazon is looking to cut out the channel with the launch of its B2B platform Amazon Business, an analyst has told CRN.
The American giant launched Amazon Business in the UK last week, having launched in Germany last December and the US in 2015.
Amazon says its B2B operation will cater to businesses of all sizes, as well as universities and public sector organisations, offering a range of products including laptops, printers and office supplies.
The Business platform provides sellers with various features including invoicing and discount capabilities, as well as the option of having Amazon fulfil the delivery on behalf of the seller.
Amazon Business was used by around 400,000 businesses in its first year in the US, generating more than $1bn in sales.
Jonathan Wagstaff, UK country manager at analyst Context, warned that Amazon's growing distribution strength could spell danger for both the consumer and enterprise channels.
"The first thing Amazon did when they reached into distribution in developing markets like China was to use local distributors to gain a footprint in the market," he said. "They then bought up warehousing and logistics companies which disintermediated the local distributors.
"They were finding that wasn't really working, so one of the things they've been doing is buying up air fleet. They've purchased aircraft all over the world in very, very large numbers and they're looking to essentially cut out the channel and distribution by bringing in products directly from manufacturers at the source."
Wagstaff said that Amazon Business has virtually wiped out the wholesale distribution market in the US, taking control of the consumer channel and going direct to end users.
Because of this, purely offering logistics is not enough for a distributor to remain relevant, Wagstaff said, claiming that he is already aware of Amazon approaching vendors in the UK to go direct through the new platform.
"I've already heard about Amazon going to vendors in the UK saying 'come direct with us', so I think it has already started," he said. "They'd be looking to take some of the best business away from some of the distributors; there's no secret in that.
"[Distributors] are going to be hit, but that doesn't mean that there isn't a counter. The enterprise model is completely different [to the consumer model], particularly when you're looking at a value-added distributor. There are things that VADs do that Amazon just do not have anything like the capabilities to do."
This is awkward
Amazon's B2B move throws into question the relationships it currently has with distributors in the UK with which it often partners to fulfil deliveries.
Wagstaff claimed these relationships could become "awkward" as Amazon looks to cut out partners on which it has previously relied heavily, especially for core categories for Amazon Prime.
"Amazon fulfils through quite a few distributors across Europe, so it's a bit of an awkward one because it's a big part of [the distributors'] business, but at the same time they'll now be going into competition with them," he said.
"There is still a play for the distributors that Amazon cannot compete in - very much that server, enterprise and value-add area.
"It's a bit of a weird situation right now where there are tonnes of distributors that all depend on Amazon for business, yet Amazon are looking to cut them out, or take some of their best vendors and the most profitable categories."
Alex Tatham, managing director at Westcoast, said that while Amazon poses a threat, distributors have become used to evolving and adapting to changing markets.
"They're a threat to the channel and they always have been," he said. "Lots of people like buying from Amazon so it's inevitable, but they're also a customer of Westcoast.
"We have exactly the same issue with every channel that we're in. some bits get taken direct, some bits don't - the point is that distribution is very adaptable and will find the best way of helping Amazon or working with Amazon partners.
"These things don't overly concern me because we've known they've been coming for a long time. The death of distribution and what it does has been predicted many times.
"You'll find that particularly with some types of IT products Amazon will do better than others because it's easy to buy things that are one-off, but many of the products that we sell now are built to order and configured to order. Amazon won't do that."
Different buying habits
Andy Wright, commercial director at XMA, said that customers often struggle with the Amazon model if they are looking to buy in volume, because of the time it can take to get orders signed off within their company.
"I've heard a lot over the years that customers would really like to buy from people that act like Amazon, but when you actually get down to it customers don't buy in an Amazon way," he said.
"Amazon provides you with a price, but if you come back in an hour's time the price might have changed or the availability might have changed. There's quite a lot of customers that struggle with that because they end up going off to get a PO, get that signed off, and when they arrive back 30 days later it's a different price.
"Amazon is about instantaneous buying - Amazon Prime is geared to make the process so easy - so it's interesting, but it's playing in the commodities market."
Mike Bacon, managing director at Academia, agreed, adding that it is impossible for Amazon to add the value and services that SMBs often need and want from channel partners.
"I don't know how they add value," he said.
"The box shift is there, it's a very efficient machine, and I guess if the box turns up on time than that's fine, but most SMBs I know want a bit of TLC and you can't get that from an online-only presence.
"I don't want to be complacent, but I don't see it as a big threat to our SMB business."
Amazon also picked out the education sector as a key target for Amazon Business, but Bacon said that schools in particular rely on the services that resellers offer alongside the products.
"I can see schools have to get best values so they have to get the pricing right - do their due diligence - but in my experience they definitely want personal services and to talk to an account manager for service levels and support. I can't see them being comfortable buying products online."
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