When the news broke that Staples had acquired DEX Imaging earlier this year, many observers speculated that the buyer was primarily intrigued by the dealer’s service component, and the industry is waiting with baited breath to see how that will translate when fully enacted (note: DEX is still hiring all across the country).
Certain partnerships can make for strange bedfellows, but it does make one wonder. Given that an online retailer like Amazon has perhaps the broadest reach of almost any business in the United States from a customer standpoint, is there any merit to the old cliché, “If you can’t beat them, join them” philosophy? Can money be made by partnering with Amazon, on a limited basis, to handle SOHO and even residential service work?
Actually, yes. But probably not enough to pique your interest or make it worth your while.
Check it out. Here’s a link to sign up and add your service competencies to the litany of independent Amazon service contractors. From installing interactive whiteboards to printer/computer setup and various IT services, you can add your name to the list of local providers for a given discipline(s). You can even denote commercial business only to avoid dealing with the general public.
Judging by the breakneck speed in which Amazon is growing all parts of its operations, it wouldn’t be out of the realm of possibility for it to expand upon its business services, which could open the door to a more substantial partnership opportunity. In fact, Amazon or other online retailers could take the Staples route and make a national push with an acquisition of one or more companies across any number of businesses and verticals.
In conjunction with the September state of the industry focus, we asked our panel of dealers to ponder the proposition of selling through Amazon or relying on the giant to provide certain ancillary products or services.
Pros and Cons
“Relative to Amazon Business Services, I think there’s going to be an opportunity. It’s not even a question,” noted Kevin DeYoung, president and CEO of Qualpath. “On the pro side, it provides business expansion. The scary cons of Amazon is what I’ve witnessed relative to commodity pricing. Amazon wants to do business with organizations to have those organizations resell their stuff off of their platform. It’s the wild, wild west on their platform. You could have commodity X, and you’re going to have thousands of other people selling the same commodities. Amazon is going to take their cut off of the sale, and you’re going to have tremendous margin erosion in whatever you do, whether it be a service or a commodity.”
Unfortunately, according to DeYoung, Amazon wants partners to provide 1,000 SKUs, and 99 percent of them wouldn’t garner any action. On the plus side, those 10 SKUs that do generate business could generate a strong amount of business. Even there, a dealer might end up doing more at a much lower cost.
“The question becomes, is that ‘more’ worth it?” he posed. “Does that make economic sense for me as a dealer or me as a VAR—that’s really the question. That’s always going to be the sticking point when you have a gorilla like (Amazon).”
AIS of Las Vegas, for one, is already doing business through Amazon. He sees the online giant as a possible partner for dealers who do not stray far beyond the traditional copier services and supplies, maintenance contracts and products. For dealer clients who have a need for VoIP or IT services, that partner could well be an Amazon.
Control Your Destiny
“But I think most dealers know that they want to be in control of their own destiny,” said AIS Vice President of Sales Dave Clark said. “There’s nothing wrong with a short-term partnership to help your business grow. But there’s going to
AIS does use Amazon in some one-off circumstances, but Clark can appreciate the danger in relying too much on the retailer as a partner. It comes down to stressing one’s value proposition as a partner beyond the mere offering.
“Anybody can offer anything, but can you facilitate it, deliver it, measure it, and improve upon it on a continual basis? That’s where most companies fall short,” he said. “Amazon helps people have a leg up. If you’re a small dealer and you don’t have excess cash and you’re looking to grow into these types of things, it’s an option. We use Amazon for cloud services occasionally, because sometimes the customer has requested it, or it’s the right business decision in regards to backup, because the customer feels that they’re better partnering with Amazon or Microsoft rather than a third-party data backup company.
“But over time, there’s a lot of great companies out there that can provide the same type of services, and that’s all they do. And because it’s all they do, it lessens the risk of them getting into our clients. Whereas we do use Amazon sometimes, I don’t think that would be a standard for us because we realize that eventually, they’re going to be a direct competitor of ours.”
For the time being, Donnellon McCarthy Enterprises (DME) hasn’t seen a business model that makes sense for the dealer to engage with Amazon (or other retailers). Rich Brandenburg, senior vice president of sales for DME, notes that many dealers in his space are struggling with how to be profitable, which calls for an extra level of caution in deciding on different flavors of partnerships.
“The traditional copier reps will go out and hunt everything they can, and they’ll make it work,” he said. “In the IT space, if you mess up the services side, you’ll ruin everything else. So it’s important to know, from a strategy standpoint, that these are the things we’re going to do, and these are the things we’re not going to do.
“(Partnering with Amazon) is not something we’re looking at currently, but you have to be aware of the changes that are taking place and be open to conversations.”
Not Enough Profit?
On the selling end, count Kevin Morris, president and CEO of OneDOC MPS, as one of those who believe the margins make it unworkable. “I think you’re looking at a lean operation from the standpoint of how they sell,” he said. “I can’t imagine joining up with a group like that in order to further our business.”
Chip Miceli, president of Pulse Technology, feels the jury is still out on whether any variety of partnership would be beneficial. Regardless, it would be important for a dealer to have some built-in protections.
“The cons are if the larger entity, like Amazon, truly just wishes to penetrate the market and would attempt to do so at any cost,” he said. “The pros are that there are opportunities for dealers to increase their share of business. Any agreement between Amazon and a local dealer would need to be very specific.”
