How Amazon is going to put some wholesalers out of business

Hot on the heels of pornography, music and taxis, will wholesale be the next industry to be transformed by the internet? Many believe online retail goliath Amazon could be on the verge of doing just that with its twin recent developments, Amazon Pantry and Amazon Fresh.

Amazon Pantry is a consolidated grocery service that enables customers to fill up large boxes with stock, which are then delivered to their doors for £2.99 (each filled box thereafter costing just 99p).

Meanwhile, Amazon Fresh will allow fresh and frozen orders to be placed and received in just 60 minutes.

With the strength of the Amazon brand and the size of the investment the company is capable of putting behind these services, they look like a perfect storm for the big four grocers, as well as online store Ocado. But for wholesale as well?

The tech world certainly thinks so. “Twenty-one years ago, Amazon reinvented the bookstore. Today, it is changing the way we think about retail distribution,” enthuses Peter Veash, CEO of ‘digital change agents’ the BIO Agency.

Retailers seem to be excited just by the idea of working with Amazon as a supplier of fresh, chilled and ambient goods.

“It would depend on the size of the minimum drop but I’d definitely be interested,” says Kay Patel, owner of a small chain of convenience stores in Stratford, east London. For him it’s the frequent, out-of-stock products that mean he’d welcome an alternative to traditional wholesale.

“There are fresh items that wholesalers list but never have in stock. That would never happen with Amazon.”

While Patel is keeping an eye on how the trials of these services develop in London, the pull of Amazon is neither geographically nor economically restricted. In an affluent and rural corner of East Sussex lies Lamb’s Larder, a store run by Peter Lamb that offers hundreds of premium, local, niche or specialist products that help to attract shoppers from well beyond his locale.

“I’m all for web technology and the system that Amazon uses is so sophisticated – it’s clearly a lot better than the systems the wholesalers use,” he says.

He plans to “wait and see” before making orders for his store through the site but, as with Patel, the trust the company has accrued over the years from the delivery of almost everything but food means that Lamb would have few reservations about using Amazon: “I can’t imagine they’d do it badly,” he says.

With wholesalers’ customers excited by the prospect of moving over to Amazon, what should wholesalers do? Leave and find a new job?

Cotswold Fayre’s boss Paul Hargreaves thinks wholesalers like his are actually well placed. 

“I can’t see Amazon getting into account management. Our team builds relationships with customers, retailers and suppliers; Amazon would be looking to shift as many units as possible,” he says.

Take a look around the industry. From Landmark’s new value and premium-focused formats to the arrival of prestige brand Budgens at Booker, wholesalers are investing millions in offering a holistic package to customers – not just a click-and-deliver service.

Industry analysts also have reservations. “Amazon presents a realistic threat to wholesalers if it can get the prices low enough, but I doubt that it will be able to,” says Verdict Retail senior analyst Andrew Stevens. 

“It will offer some products that traditional wholesalers can’t and will offer greater flexibility in terms of organising drops,” he suggests.

But will this be enough to replace the business development managers, the fascias and the own-brand ranges that wholesalers supply?

In truth, Amazon looks set to give a further kick to the battered business model of the traditional cash & carry: the warehouse where retailers walk around, pick up products and leave without saying a word. There might be little hope for anyone still clinging to this model – but that may be true, whether Amazon moves into the market or not.