In an interesting blog post at Applicoinc.com, Nicholas Johnson states:

Amazon Business head Prentis Wilson has openly identified Industrial Supply as a target for Amazon’s growing B2B marketplace. But one industry segment in particular stands out as ripe for disruption: the $160 billion electrical distribution industry.

The reason:

While other industry segments like electronics distribution typically involve a lot of custom orders and closer cooperation between distributors and manufacturers, many of the goods sold in electrical distribution are essentially commoditized.

He points out there are 15,000 electrical distributors in the United States within a highly fragmented marketplace in which the large majority are smaller players.

Says Johnson:

A company like Amazon has the resources and logistical services to attract a large number of small sellers very quickly. Once Amazon has the breadth and depth of inventory that these small suppliers can offer, the marketplace can begin to compete with the major distributors on price and quality.

One option for the larger distributors is to create their own marketplace, as this market strategy is less capital-intensive and faster than consolidation. Johnson concludes:

Who will own this opportunity in electrical distribution is not yet certain. But with industry demographics pointing toward a strong marketplace opportunity, the current structure of the industry will likely not last for long.

Check out Johnson’s blog post here.

Craig DiLouie

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