A&M’s Michael Nelson: Distributors ‘caught in the middle’ of Amazon’s B2B expansion

A managing director with a company that helps “distressed and healthy” companies meet operational challenges has given his take on the vulnerability of distributors in light of Amazon’s expansion into business-to-business commerce.

Michael Nelson, a managing director with Alvarez & Marsal (A&M) Corporate Performance Improvement in Chicago, told the Houston Daily that although Amazon is known for business-to-consumer activities, it is expanding into B2B, putting distributors at risk.

“If you look at most of the growth projections, the biggest chunk is coming actually in the business-to-business space, and that’s the space that a lot of distributors play (in),” Nelson said. “The way Amazon looks at that is if they can pick off certain parts that have margin to them, they are so efficient at how they can turn store and ship parts, they can take that business away from the distributors pretty darn quickly.”

Automotive distributors and consumer electronics distributors are particularly at high risk, a McKinsey report said. A&M agreed with that assessment after it reviewed the digital capabilities of automotive and electronic distributors in its report.

Original equipment manufacturers who produce parts and engines that are sent to distributors who in turn take them to the market are wondering how they can get access to consumers, Nelson said.

“People like Amazon are saying, ‘How do I get access to those parts, so that I can sell them?’ and the distributors are really caught in the middle," Nelson said.

In order to compete with Amazon, distributors need to change their business model by improving their digital capabilities – “enabling digital content,” Nelson said. That would include setting up a website that contains three-dimensional photos, descriptions plus reviews of parts and how they operate.

“You gotta react quickly, and you have to make sure that you're providing a content-rich environment that your customers can truly benefit from,” Nelson said. “Because if you aren't adding value to them, they will find somewhere else to go.”

A&M surmises in its report that “e-commerce and digital customer support, are the way forward,” and that “digital capabilities will make the difference,” but “time is of the essence” and “new value propositions are needed.”  

Through its advisers, interim leaders and partners, A&M provides companies worldwide with “global leadership, problem-solving and value creation,” its website said.