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World parts domination

Amazon positions itself to control e-commerce with new supply chain venture
Thursday, February 25, 2016 - 09:00
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“It’s a jungle out there.” 

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Most automotive parts distributors wouldn’t argue with the point of view in trying to describe the affect Amazon has on the parts distribution business. Once considered a weak competitor, or to be generous, a nuisance, Amazon has proven to be a legitimate mover of parts to both consumers and to automotive repair shops. As an agent of disintermediation, which is disruptive in a business where three-step distribution is sacred, Amazon now is being watched closely by the traditional and retail aftermarket distributors, who both have e-tailing aspirations.

Presently, the threat to distributors comes from the e-tailer’s Fulfillment by Amazon service because it can manage inventory for manufacturers as well, if not better in some cases, than traditional distributors. Product storing, picking, packing and shipping are all included at a lower cost because Amazon is performing these tasks at highly efficient facilities using highly efficient and sophisticated software, which frees manufacturers from a costly expenditure either directly or indirectly through their traditional distributors. What’s lost is any value-added service that automotive distributor specialists can offer, such as down channel training.

Not satisfied with grabbing market share from the parts distributors, it appears that Amazon may be out to challenge its delivery partners, FedX and UPS. Amazon’s ambitions were recently brought to light by Bloomberg News after Amazon was asked about some curious shipping behavior. More questions arose when Bloomberg examined a copy of Amazon’s 2013 senior management report.

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Bloomberg reported that Amazon’s odd behavior — leasing planes and registering an ocean freight booking business — was downplayed by Amazon as ways “to supplement its delivery partners…during peak periods…” Well, OK, everybody understands crunch time and you have to do what you have to do to fulfill customer obligations.

But it is the senior management report that may be the more reliable source in helping to determine Amazon’s motives. The report describes a new venture called “Global Supply Chain by Amazon,” a title that is anything but subtle in its intent, but world domination rarely is.  

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