Distributors, if you are still on the fence about the viability of ecommerce as a growth strategy for your organization, let Best Buy’s current state of affairs serve as a warning to you: Any company who sells your products via ecommerce is your competition, even if they aren’t taking away your business right now.
Best Buy built a highly successful electronics empire on a business model that focused on providing the best products and service in its bricks-and-mortar big box stores. These stores provided the widest selection of electronics, movies, and music to consumers for many years and were quite successful in providing an experience that competitors such as Circuit City and CompUSA could not compete with. CompUSA shuttered its business in 2007/2008 with Circuit City following shortly in 2009. Unfortunately, Best Buy failed to acknowledge that online retailers such as Amazon.com and Newegg.com played a role in its competitors’ demise and that eventually these online competitors would focus their sites on the market leader: Best Buy.
Amazon.com was founded in 1994 and sold its first book online in 1995. At that time, Best Buy was already clearly a force to be reckoned with in the electronics market. In the years that followed their launch, Amazon.com subsequently upended the book selling business, driving more electronic book sales than physical book sales and forcing smaller book retailers to close their doors. As late as October 24, 2008, Best Buy was still pressing forward with their big box strategy, having just opened their 1000th store at the Mall of America in Minnesota. While the electronics retailer had an ecommerce presence, it banked on the idea that its dedicated consumers would always prefer to purchase in-store. They were wrong.
The reality is that consumers were quickly catching on that they could purchase the same electronics brands online at retailers like Amazon.com and Newegg.com for less and without paying for shipping or sales tax. These savings, in conjunction with the weakened economy, motivated the consumer to wait a few days to get his electronics purchases in order to save money. What’s more, the average consumer could purchase electronics whenever he wanted without consideration of when a store might be open and without having to drive to the physical location. As more electronics sales moved online, Best Buy quickly felt the sting of the competitor it never paid much attention to: ecommerce. As a result, today Best Buy is focusing more attention on ecommerce and shrinking its fleet of physical stores in an effort to keep up with its online-only competition.
The Take Away
What does Best Buy’s plight have to do with today’s distributors? A lot–even if you aren’t an electronics distributor. Amazon.com’s recent move into the industrial, business, and scientific supply world with AmazonSupply.com should be considered fair warning that your business is about to change. If you don’t have an ecommerce strategy in place or your ecommerce strategy is second to your bricks-and-mortar strategy, now is the time to switch your focus. You may feel that Amazon or other online competitors will never be able to give you a run for your money, but I am fairly certain that Best Buy would have said the same thing. AmazonSupply.com is looking to take a large bite out of your business and it’s essential that you don’t fall prey to thinking you are immune.