The number of M&A transactions within the broad world of safety equipment and services continues to hold, and even to climb slightly into 2017. Published predictions today talk more often about “steady activity” and “cautious optimism” – significantly less bullish than the predictions we would have heard a few years ago. The number of really large mega-transactions in the industry, however, took a slight pause for 2016, and appears less likely to climb for 2017.
Why is Amazon Business selling safety products along with many other industrial supplies?
“We heard from business customers that they love the convenience of shopping online, and want an experience at work that is similar to how they shop at home,” an Amazon spokesperson told ISHN’s For Distributors Only in an exclusive interview.
Treat Amazon as a beast, clever and super aggressive, is one safety products manufacturer’s advice to distributors. “Amazon is a creature out there that moves forward, sometimes clumsy, but over time figures things out,” says this manufacturer, who sells safety supplies on the multibillion dollar site.
“Amazon Business provides easy access to hundreds of millions of items, including selection from industry-leading manufacturers such as 3M, Kimberly-Clark and DuPont Protection,” says the Amazon spokesperson. “We’ve been selling safety products for several years now, and are continuing to grow our selection.”
All about user experience
Amazon.com, with total company first quarter 2017 sales up 23 percent to $35.7 billion, is a disrupter wherever it goes. Just ask Sears, Macy’s, Borders Books, Tower Records and Whole Foods. But its present and future impact on the safety supply chain is really part of a larger story. A “tectonic shift” is occurring in safety distribution, says one manufacturer. “User experience” has not been a traditional industrial term – but that was then, this is now.
User experience is about intimacy – another term not associated with industrial selling. But the friendly and fun user experience created by Apple consumer products is spilling over into the industrial market. Intimacy is about giving purchasers options, lots of robust information, enhanced content, videos, professional reviews, lots of photographs. Shopping online, purchasers may end up looking at 10 to 20 items, and analytics anticipate user behavior, making add-on buying simple and easy.
“Distributors who don’t make customers feel purchasing is easy are out. Customers are Amazon’s obsession,” says a manufacturer. “You don’t need to be paranoid, but sure as hell super pay attention to what buying changes are occurring and give customers what they want.”
Online shopping grows
Two significant changes are disrupting safety distribution — one technical, one demographic. Technical disruption goes beyond Amazon’s growing presence to encompass the overall growth of online shopping. Grainger Vice President and President of Larger Customer and Direct Sales Deb Oler told ISHN’s For Distributors Only in an exclusive interview that “more than 65 percent of Grainger’s orders in 2016 originated through a digital channel and approximately 57 percent of revenue in the United States came from such channels.”
Here’s the demographic disruption: “Every day purchasing and safety managers are hired who are younger and younger,” says Kevin Brown, principal of Sunwest Ventures, a boutique advisory and investment firm with more than 25 years in the safety and industrial channel. “These younger managers influencing the supply chain are driven by mobile and online transactions. They are less concerned with a route salesman bringing in donuts on Tuesday or a long-standing purchasing relationship with a vendor or even a technical specialist and more concerned about ease of use and a seamless transaction.”
Brown says the new generation of safety buyers take Uber to work and dinner, stay at AirBnB on vacation, order dinner using DoorDash food delivery and pay for haircuts or split a dinner bill with friends using Venmo, a mobile pay service owned by PayPal that allows users to transfer money between one another using a mobile app or web interface.
New buyers will take the path of least resistance and buy how they are comfortable, predicts Brown. This buying behavior will only increase as baby boomer safety managers and purchasing agents who don’t like buying online or are comfortable with their local supplier who has been calling on him for years retire. “The customer is changing, so the distribution model will change,” says Brown.
Changing of the guard
Dan Shipp, recently retired as president of ISEA – the International Safety Equipment Association – after a 24-year tenure, sees the same changing of the guard. “The person buying PPE for a company may have been doing business with his good buddy from the local safety distributor for a long time. But the next person in that position is likely to have bought a CD, or a book, or a kitchen faucet, or a camera from Amazon. He had a good customer experience. So it’s a simple and natural step to use that channel for company purchases as well.”
“Everyone in the industrial safety supply chain is at risk at this moment,” says Brown. “It’s less about national or local distributors and more about the behaviors of the end-user customer. When an end-user buys his fishing rod or her yoga clothes and laundry detergent on Amazon and they love the experience, why wouldn’t they buy a safety product, especially a commodity like safety glasses or disposable dust masks on the same app they buy their personal items on with ease and comfort?”
What disruption?
To be sure, not everyone sees or feels a “tectonic shift” occurring. Mike Smeaton, president of Safety Network.me/Safety Marketing Group and former owner of Quad City Safety, Inc., tells ISHN’s For Distributors Only that “suppliers are looking for volume and really don’t care about ‘market disruption.’ Our distributors have not seen a great deal of Amazon in the marketplace; the exception would be spot buys. Amazon does have a value proposition – move boxes – and they do it well. But I don’t believe Amazon employs customer service personnel and as a result no technical help.”
Grainger views Amazon as a competitor, according to Deb Oler, who says her company has expanded far beyond “moving boxes” with technical support, training, and customer service to “create insight-driven solutions for different types of customers. We have decades of experience helping customers solve some of their most complex safety concerns. Our safety experts hold degrees and certifications in safety, industrial technology, chemistry and related fields. They solve unique challenges, identify cost savings, and recommend solutions that lead to more effective safety and health strategies. Last year, customers contacted our experts with more than 120,000 questions on key safety issues.”
Alternatives to moving boxes
Grainger is certainly not the only distributor of safety products to place an increasing emphasis on training and consultative services. Numerous local and national distributors have similarly invested in safety specialists with deep knowledge and subject matter expertise, capable of compliance assistance and conducting on-site surveys, inspections and training. Some distributors also are adopting a programmatic business model as part of their value proposition, offer prescription safety eyewear programs, AED programs, and equipment service and repair programs.
The continuing popularity of ISEA’s Qualified Safety Sales Professional one-week training program is evidence of the importance safety distributors and manufacturers are putting on post-sale services. The course has more than 1,500 graduates, taught by a faculty of safety professionals. Graduates can identify and evaluate hazards, study air samples and exposure levels, respirator fit testing and fall protection basics, electrical safety and confined space, and understand OSHA regulations, compliance and enforcement.
In 2016, Airgas announced that 80 associates had completed the QSSP course and received QSSP certification. “QSSP builds confidence in our associates and credibility with our customers to ensure that we continue to provide safety products that support our customers’ written safety programs and safety protocols,” said Mark Dannemiller, Airgas vice president of safety sales in a press release.
Right now Amazon “clearly has trouble with consultative technical support as a web-based pure play creative,” says a manufacturer. “They kick your butt selling commodities. But they’re limited in selling bulky goods like SCBAs, fall protection harnesses and eyewash showers and stations. I don’t see them taking lots of share from distributors today. Distributors clearly have a leg up with safety services.”
Don’t expect that to remain the status quo. “Amazon is super aggressive,” says one manufacturer. Says Dan Shipp: “Amazon is a learning organization, with enormous resources and the ability to adapt quickly and try a new business model if something isn’t working the way they planned.”
Beyond commodities
So Amazon can’t ship heavy equipment? In July, Sears and Amazon struck a deal to sell Sears’ Kenmore brand refrigerators, air conditioners, washers, dryers and other appliances on Amazon. Sears’ existing distribution channel will handle delivery, installation, haul away and returns.
Amazon is also making a major push into furniture sales. It is building at least four massive warehouses to fulfill and deliver bulky items, and in August alone hired 50,000 people for warehouse work. About 15 percent of the $70 billion U.S. furniture market has moved online, according to researcher IBISWorld. If Amazon can sell refrigerators and sofas, it can sell emergency showers and SCBAs.
“They have the cash and desire to do anything that makes the customer experience better for growth and the capture of additional market share,” says Kevin Brown. “The ‘dump it in a box and sell’ model is changing fast. It wouldn’t surprise me a bit in the coming years to see Amazon buy a safety shoe mobile/delivery company and a national or international safety services company to handle fit testing, air monitoring, safety audits and so on.
“I wouldn’t be shocked to see Amazon buy one of the major national safety or industrial distributors – did anyone really see the Whole Foods deal coming?” he says.
Future plans
The Amazon spokesperson simply says: “We will continue to build out features and innovate on behalf of our customers.”
As for Grainger, Deb Oler says: “We will continue to build on our advantages around the right products and superior technical expertise. We already have a powerful e-commerce engine, and we continue to enhance features that promote a personalized and relevant experience for each customer.”
And what about safety distribution’s future plans in general? “Distributors have to stay on their guard,” says one manufacturer. Expectations now are different. Customers want their package tomorrow – that’s de rigueur in business now. Amazon wants to win in assortment. They have a delivery advantage. Small and boutique distributors don’t have scale, so what weapons can they use – such as deploying small vans to drop off everyday products at a site, super speedy delivery, training, safety knowledge expertise? Just know that things will change and change again in the next five years.”