Amazon Aims To Compete With ADI and Anixter

By Brian Rhodes, Published Jun 01, 2015, 12:00am EDT

The ambition of Amazon has no end.

Recently, we explained how Amazon has gotten into the security installation business which generated strong debate and concern.

At the same time, Amazon is also expanding into commercial distribution.

How much of a threat to traditional security distributors? In this note, we examine Amazon Business [link no longer available], based on multiple discussions with Amazon representatives, examining the details of the offering and how it compares to ADI and Anixter.

Commercial Focus

Amazon is pushing their 'Business' program by billing it as a way for commercial companies to tap into their vast online marketplace and affiliate vendors to supply products.

Amazon is offering free memberships with the same products as personal accounts, but adding features typical of traditional commercial distributors and not offered with normal Amazon accounts:

  • PO Number Support: Users are able to code purchases with ID numbers that refer to specific projects or internal management systems.
  • Order Reports: Business customers can download activity summaries against date ranges, requisitioners, or by PO numbers. These reports are available in .csv formats and might importable into accounting or inventory management systems.
  • Drop Shipping: The option to ship packages directly to a job site or different address other than the billing address on file. 
  • Tax Exemption: For qualifying customers like Churches, Non-Profits, and Governments, Amazon offers 'line-item' application of sales taxes.

Applicants must supply a Federal Tax ID number, but otherwise the basic application process is unchanged from private signups. 

Free Two-Day Shipping

Amazon also hopes to entice businesses by offering free two-day shipping for purchases over $49, similar to the way Amazon Prime works for consumer purchases.  

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If overnight or next day freight is requested, Amazon warehoused orders typically offer the option but affiliate stores may not.  If available, rush shipping ranges between 3X and 8X normal 'best option' ground shipping options. If 'Business' customers are also 'Prime' members (an additional $99 per year), the $49 order minimum goes away. 

In contrast to traditional security distributors that typically bill freight on each order sent somewhere other than the local branch, this program offers to ship to any address if the minimum is met.

Security Offerings

Essentially the same products that can be purchased with an 'Amazon Business' account are otherwise available on Amazon. For example, a spot check of some commercial security brands shows product available from multiple vendors:

However, Amazon's availability of surveillance products are far more limited and fractured than traditional distributors.

Discounts Limited

Pricing through Amazon is generally similar as basic starting prices from traditional distributors. However, buying through Amazon will not include negotiated prices, partner discounts, project pricing, or total volume discounts.

Additionally, if a manufacturer requires special approvals or training to purchase products, as is common with VMS or certain access lines, it will not likely be available through any Amazon Business resellers.

Amazon says they so offer some discounts, however we found no examples of discounted or restricted offerings to Business accounts.

Amazon explained the special pricing policies to us:

"Business Pricing is offered at the seller or vendor's discretion and 'deals' may sometimes last for several weeks, days, hours, or even minutes. Business Pricing is a fairly new feature, so we are still working on offering many items with this special pricing system. "

Essentially, any price breaks are given for a limited time and is the reseller's option. No discounts for volume purchasing are offered.

Credit Lines

Another piece that differentiates consumer from commercial purchasing is more favorable credit terms that include longer payment windows or lower/differed rates over a period of time.

Amazon is offering credit to 'Business' customers through a separate credit division called 'Corporate Credit'. In general most approved accounts will be allowed Net 55 terms with no interest provided full payment is collected. APR of 12.99% applies to all new accounts.

Phone Support

For businesses, Amazon offers a number of methods for account support.  The fastest method is phone support, which is tied to a specific 'account manager' for each business account.  

However, unlike a traditional security distributor, our rep had no specific knowledge about security products or any products in general.  We could not ask for technical support numbers, nor was our manager able to recommend any products or even quote sale prices in a particular category.  

Manufacturer Draw to Amazon

If Amazon Business takes off, it could motivate manufacturers or smaller resellers to sell directly on Amazon. Historically, Amazon has been a consumer focused retailer, demotivating vendors selling large quantities to re-sellers like integrators. With these new functionalities, Amazon's issue of limited security product availability could be narrowed as suppliers view Amazon as a more attractive distribution outlet.

Comparison ADI / Anixter vs Amazon

The main advantages Amazon has over traditional security distributors are:

  • Marketplace Size: It's not just security - it's everything.  Unlike security distributors who draw a boundary around their offerings, Amazon does not. The same place your buy pens, copy paper, and mop buckets also is able to sell you cameras and wire.  This means purchasing can be made more efficient because instead of multiple vendors, you just place orders with one.
  • Product/Affiliate Ratings: Is that camera a lemon or hidden gem? While no rating system is infallible or without risk, Amazon's customer-based 'star' rating system is better than the nothing you typically get searching distributor websites.
  • Competitive Pricing: There are two basic criteria an affiliate uses to distinguish itself in Amazon's marketplace: Low Price and 'Star' Rating. The heavy bias that low-pricing plays in favorable search result rankings almost always guarantees pricing at the lowest levels. While distribution is already a cut-throat vertical, Amazon squeezes it even more by encouraging the lowest pricing to show up first.

However, there are many drawbacks of Amazon's approach:

  • Limited Inventory: Unlike traditional security distributors, Amazon and it's affiliates may be 'grey market' sources for many items. If a traditional dealer does not have a particular part, they often are able to order it.  However, if it does not show up in an Amazon search, it simply is not available. Using Amazon as a sole source for security items is risky, because there is no guarantee the affiliate furnishing the item today will tomorrow.
  • No Technical Support: If you have questions, you're likely out of luck.  Getting affiliates to support your purchases is not out of the question, but it is a big unknown and risk when buying.
  • Anyone Can Join: Unlike traditional security distributors that may limit potential customers to resellers in the space, you basically need nothing more than a Tax ID number and a credit card to buy. While this method has always been available to private accounts, the appeal to business purchasing may squeeze equipment markups that much more.

End Users Benefits

Amazon Business for security purchasing will greatly benefit end users looking for a no-nonsense supplier for security gear.  With no reseller channel to keep happy and low-pricing being king, the 'internet procurement age' continues to ravage traditional distributors. Integrators supplying line-item quotes make customer markups checking as easy as using a search engine for a considerable portion of the security market.

Reseller Benefits

However, there may be redeeming value for traditional resellers too:

  • Commodity Purchasing: With the heavy emphasis on low-price, getting multiple quotes and seeing the lowest is almost an instantaneous feature. Shopping around for best pricing and availability is much easier through Amazon.
  • Second Option Sourcing: While Amazon Business will not likely replace ADI, Anixter, or incumbent security distributors outright, it may very well become the 'backup plan' for many items given the quick shipping offers. The limiting factor preventing Amazon from truly usurping security distributors in the fragmented availability of many items.  Many integrators, big or small, will keep Amazon as leverage to keep distributor pricing and availability in check.

1 report cite this report:

Manufacturers Sound Off On Distributors on Aug 12, 2015
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