Many fear Amazon as an insatiable monster seeking to gobble up every market it enters. To some extent, that’s true. Though Amazon did not respond to requests to comment on this story, statements made by CEO Jeff Bezos and other publicly released documents by the company show the business does not enter markets haphazardly.
Any commitment by Amazon to partner with medium- and heavy-duty aftermarket manufacturers and warehouse distributors is calculated. The company has yet to invest much time or resources in the aftermarket, but if (or when) it does, a market share goal will be in mind.
“We can’t pretend they will go away or won’t be interested in us. That’s nuts. They are interested in everything,” says Bill Wade, partner at Wade & Partners.
Wade, who has coined Amazon as the “greatest invention in business since the production line,” admits his concern regarding the e-tail giant is larger than most. He says a lot of the distributors he speaks to in today’s industry view the company as too large and diversified to provide the focused level of customer service found in the aftermarket, and that price benefits offered by Amazon are no match for the product expertise and delivery speeds found in the aftermarket channel.
He says he agrees with some of that. But he also says Amazon’s goal when it enters a market isn’t 100 percent market share. The goal is to capture enough of the market to change customer purchasing habits — to pull enough customers away from conventional distribution to make Amazon a viable option for the orders where product expertise, delivery speeds and other customer services are not as important.
“They don’t stand around trying to grab the last percentage point of any market; they get as much as they can and then move to the next market,” Wade says.
It also helps that unlike everyone else in the independent aftermarket, Amazon’s distribution business doesn’t have to make a profit. An April breakdown of Amazon’s first quarter earnings by The Street determined that despite earnings of $1.9 billion for the first quarter of 2018, when separating Amazon Web Services and Prime from its earnings Amazon lost “about $2 billion last quarter.”
“You can’t sit back and think, ‘We don’t have to compete with that,’” Wade says.
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