Amazon's Wholesale Slaughter: Jeff Bezos' $8 Trillion B2B Bet | Hacker News Reader

Amazon's Wholesale Slaughter: Jeff Bezos' $8 Trillion B2B Bet

forbes.com

96 pointsgrej40 comments

For anyone wondering, this is basically how PR works at its absolute best.

This piece has been published because Alibaba is about to IPO and Amazon wants to take a little bit of wind out of the sails by puffing (as its called in the trade) its own otherwise obscure competitor.

Note how the journalist writes how AmazonSupply has never been mentioned before outside of the 2012 General Meeting - the hook to make you think this is some inside track he/she has just discovered - and then out come the canned quotes from an array of AmazonSupply VPs because, actually, this isn't some scoop s/he discovered, its been spoon fed to her/him.

This was designed and crafted by Amazons PR firm, probably pitched to a freelance journalist who in turn pitched it to some outlets and Forbes bit. The date of publishing would have been agreed way in advance and Amazon PR may even have had rights to review/edit the piece.

Its a manipulation of media in some ways given the piece has only been crated for the sole interest of Amazon (there's no objective analysis or mention of competitors) and the rest of us are pawns reading it.

You're right, the article reads like a PR plant. However, the author doesn't seem to be a shill for PR flacks in her other stories[1]:

- a relentless stream of articles on appalling behavior of apparel manufacturers exploiting workers in Bangladesh

- retailers putting religion at the center of their brand image

- the struggle for a living wage by fast-food workers

- the launch of Walmart's money transfer service, along with stories about Walmart exploiting workers and taxpayers

[1] http://www.forbes.com/sites/clareoconnor/

Putting on my tinfoil hat it seems like almost all of her recent articles cast negative light on existing large retailers. You'll get shot going to Starbucks and Jack in the Box. J.C. Penny still hasn't forked over money for the victims of the Bangladesh factory collapse (and neither has Walmart but they don't use that factory so that's a weird thing to mention). You're exploiting fast-food workers by eating there. Hobby Lobby and Chick-fil-A are controlled by religious nutjobs.

None of these are a problem if you shop at home from, say, Amazon.com.

Yes, this sounds like "Freelance Journalist"

Right. Alibaba and Taobao are perhaps the biggest competitors to Amazon's physical goods fulfilment lines. They still have problems getting meaningfully out of China, though.

It's a fascinating area, and there's still huge room in specialist verticals, though. Perhaps five years ago, I interviewed at a London-based company doing over a billion dollars a year in trade just in the global shipping parts supply area. Holistically, SilkRoad is another example of a vertical-specific offering, albeit unconventional. Earlier this week HN featured a job from a startup apparently focused solely on inbound US customs-clearance for importers.

There's clearly huge money in this area, and lots of challenges.

Cross closer to the manufacturing side, and people have been slowly hyping up something called JIT or just in time manufacturing... the idea of highly dynamic sourcing from a highly available network of partners. Reputation systems and legal considerations obviously weigh-in big here, and the promise has yet to be realized. The 3D printing world and its resulting prototyping machinery has also been accelerating in this area.

It seems to me that what is truly needed here is not a new centralized platform (oh, so dotcom-era!) but a generalized, extensible language for describing RFQs and quotations with the capacity to add detailed information regarding logistics (shipping, warehousing, customs clearance, legals), financial and physical settlement routes, and reputations (not just happily settled n previous transactions, but definitely supplied n units/period from prior fulfilments).

I believe that every wholesale business of non-trivial size will some day have open source platforms providing this kind of business intelligence, risk management and operational support (sort of like SAP on steroids), and that global financial, regulatory and supply-chain systems will become more open and decentralized in tandem with these changes.

I have a no-time-to-progress-of-late, but braindump-level-documented approach to this problem space over at http://ifex-project.org/ which grew from the disparate operational requirements of dealing with cryptographic and conventional currencies/settlement routes at http://kraken.com/

Required reading: http://www.paulgraham.com/submarine.html

I enjoyed your story and generally believe Bezos and Amazon to be very shrewd marketers and PR manipulators BUT ... do you have any evidence to back up your claims?

WRT josefresco's request for evidence, could we not discourage these requests by downvoting? I keep seeing this lately, and I don't think he could have phrased it more politely. Whether the data (or lack of it) strengthens or weakens the argument, any challenge improves the quality of discussion, especially polite ones.

That's the beauty of manipulating the press. All the evidence is private. Your skepticism is what makes it such an effective method of molding public opinion.

Thanks for putting it so well. It is mental jujutsu. You leverage your opponent's strength against herself.

>You can get industrial motors, flanges, valves, fasteners, materials, janitorial supplies

This is a precise definition of Alibaba's market segment.

Alibaba connects factories directly to businesses. I don't know a ton about the company, my introduction was a story from maybe 2011 about a kid from Michigan who made a million dollars selling iPod minis to his classmates until Apple shut him down

Edit: I couldn't find the link, this is the closest thing I could find

http://www.startupbros.com/how-you-can-make-big-money-import...

Alibaba does a lot more than B2B. They do regular ecommerce sales like Amazon, run a financial service (you deposit money and earn interest, quite respectable interest too) and a lot more.

http://en.wikipedia.org/wiki/Alibaba_Group#Companies_and_aff...

His track record. Bezos did the same thing the night before Cyber Monday last year with his drone story in order to capture the news cycle for the day and get in front of consumers.

I think the timing is pretty strong evidence

http://paulgraham.com/submarine.html

Does the PR firm get bonus points for re-plugging the ridiculous Amazon delivery drone PR move from cyber monday?

The sad thing is that this is the general state of the media these days, and has been for a long time. The old standard is a media of middle men, a media of folks who know the J-school way to translate just-in-time learning into carefully formatted and worded stories that would fit the form and flow of newspapers and be easily digested by their readers. But, to be frank, that's a lazy job, and a poor one too. And, as demonstrated here, is easily manipulated because the so-called journalists are typically salivating for "access" and not well versed in the subject matter they allegedly cover, so they can be baited with carefully crafted PR pieces.

The problem is that's it's worth about what we pay for it...

That's a problem largely because the transition is a difficult one. The problem is that fundamentally the vast majority of folks who did journalism in the pre-internet era are not suitable for doing journalism in the internet era. That has nothing to do with tech savvy and everything to do with subject expertise, something that journalists have for the most part eschewed.

One consequence of that is that a lot of modern journalism is pretty interchangeable. Thus not very valuable in the internet age. Thus not very valued.

That doesn't mean all journalism must be that way though, or that people are universally unwilling to pay for good journalism. However, it does mean that in the majority of instances there's no easy transition from where they are now to a state of journalistic practice that is sufficiently valuable and sufficiently valued enough to be self-sustaining in the internet world.

We'll likely have a period where a lot of old forms of journalism are dying or dwindling without replacement before new forms come around.

The article does have analysis of competitors, including W.W. Grainger and Cardinal Health. Did you read it?

Funny you say that. I thought the writing of this article was far too good for Forbes, which is a shifty piece of trash.

Just for fun, I decided to look up the price of Acetal rod on amazon supply.

Acetal Copolymer Round Rod, Opaque Black, 1/4" Diameter, 36" Length $7.86

Price at Enco : $2.29 for a standard 4' length.

Amazon: $2.62 per foot!

Enco: $0.57 per foot.

Grainger doesn't have it in black, but for white: 1/4" 6 Ft - $2.94 $0.49 per foot (Note that white is generally cheaper then black.)

I have hopes for Amazon Supply eventually adjusting their prices to 'sane' levels. But right now, they got some wacky pricing.

Edit: Checked McMaster Carr pricing.

White: $0.53 per foot

Black: $0.56 per foot

This is not that surprising.

I moved a few months back and was looking to get a bunch of items (handheld vacuum, battery charger, etc). I compared Amazon to HomeDepot, BestBuy, etc and Amazon was almost always more than the big box stores. And when I say more I mean 10-20% more.

Amazon is awesome when you want to buy stuff that isn't easy to find. I don't mind paying a premium then since I don't have to spend time calling around to see who carries it and then drive to the store. But for commodity type stuff, I always double check since Amazon often has a much higher price.

Yeah I mentioned it to a friend who was doing fabrication work a few years ago when Amazon had just turned their acquisition of Small Parts into Amazon Supply. The prices were outrageous. For comparable parts, the pricing was on par with Home Depot, far from what you would expect a wholesaler to provide, let alone someone trying to cash in on the market of companies like Grainger.

So no, if they've had these prices for the past two years, I don't see it changing much going forward. If it does get lower, they're playing the market all wrong.

The prices at Small Parts were very high long before Amazon acquired them.

Small Parts didn't really compete in the mass production supply chain. They were aimed at prototypers (the guy who needs 1 or 2 of something, not 1 or 2 million). Even taking that into account they were pretty spendy.

If Amazon thinks the wholesale market is the same as the "end consumer market" they should think again

Really think about it

The sexiness of AmazonSupply disappears once you start searching for products. Industrial parametric part search is incredibly hard to get right, and McMaster-Carr is the clear leader in online. The article didn't even mention them. AmazonSupply/SmallParts is pretty cut-rate by comparison, both in selection and ease of search.

The Amazon site is simply horrible compared to somebody who actually knows what they're doing: Mcmaster-Carr http://www.mcmaster.com/

I get why Amazon owns consumer online retail. But I just don't see how that success can translate to success in industrial products. Different DNA.

I had never been to McMaster-Carr's site. That's an amazing construction. I have absolutely nothing to do with 99.9% of what they sell, but I found it incredibly easy to navigate and understand. They properly focused all their effort on navigation and finding, rather than aesthetics.

Came here to say this. McMaster-Carr has being improving their site to the point where there is no guessing at what the part you are buying is. Heck, even their iPad app makes an enjoyable user experience for buying bearings.

Here is another YC startup that is doing the same for hardware components: http://octopart.com/about

A brief trip to the AmazonSupply site reveals that it's definitely not ready for prime time. After doing an initial search, a somewhat random selection of products in the category were displayed. But whenever I clicked through to the detail page, I got an error that the page did not exist.

Also, there was one really hilarious whopper in the story that deserves some attention:

"If there’s one company standing in Amazon’s way, it’s Chicago-based industrial supplies giant W.W. Grainger. With $9.4 billion in revenues it’s definitely the business to beat, controlling an estimated 6% of the entire B2B market. With a robust e-commerce operation."

While Grainger is a serious competitor, their actual competitive advantage is that they have numerous local outlets that you can actually visit. If the local store doesn't have something, they'll send it to your local store at no charge.

With that said, Grainger's site isn't particularly great, although visiting it just now, it seems they may have improved the usability a bit. I'd hardly characterize it as a "robust e-commerce operation."

The real competitor, at least on the web, is McMaster-Carr. Their product selection is vast; their prices are usually better than Grainger; their delivery is incredibly speedy, with orders typically arriving the next day, even with standard shipping. On top of that, their site is amazingly good for drilling down and finding exactly what you need.

If you use these much, mscdirect.com is strong competition for mcmaster-carr, because they often have better prices and their shipping is very fast--although the site can only be used in internet explorer at times. These are all US-centric, because there are great sites in Europe that operate in the same space and will also be competition for Amazon.

Interesting quote:

> While U.S. retailers took in more than $4 trillion in revenues according to the most recent U.S. Census, wholesalers brought in $7.2 trillion selling everything from Bunsen burners to toner cartridges. Even better for Amazon: Of America’s 35,000 distributors, almost all are regional, family-run companies pulling in annual revenues of $50 million or less, and only 160 have more than $1 billion in sales annually.

Very interesting in the context of this article from yesterday, about U.S. businesses being shut down faster than they are created: https://news.ycombinator.com/item?id=7703721.

How many people will be made obsolete by Amazon's movements into this sector, how many middle-American cities will see money flow away, etc? Not criticizing Amazon, of course, seems like a market that's ripe for disruption. Just food for thought.

I wonder if it would make sense for Amazon to buy Grainger, Graybar, or Cardinal Health, now that Amazon has sales tax issues in every state (well, and wholesale b2b wouldn't be an issue, but if it were directly Amazon it would have caused the consumer business to pay taxes.)

If you want to beat Amazon at this, then do really well at something Amazon is bad at: Search and categorization.

If you need some specific part with specific specs, it's virtually impossible to get a list of candidates that meet those specs. Instead you need to know the manufacturers, check them, then search for each model number separately.

Finally! I've been envying Chinese Alibaba user's for a while now... Good to see some movement in that space!

It's been around since 2012 and it's not as good as Alibaba.

Interestingly, Grainger are using an off the shelf ecommerce platform called hybris. I imagine they made (or got someone to make) many modifications to its extended functionality though.

When I click on any of the product pages they are all 404's. Is this a dummy site?

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