{"id":25492,"date":"2017-11-15T20:11:56","date_gmt":"2017-11-16T01:11:56","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/responding-to-e-commerce-disruption-should-medical-supplier-owens-minor-fight-or-embrace-amazons-threat\/"},"modified":"2017-11-15T20:15:55","modified_gmt":"2017-11-16T01:15:55","slug":"responding-to-e-commerce-disruption-should-medical-supplier-owens-minor-fight-or-embrace-amazons-threat","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/responding-to-e-commerce-disruption-should-medical-supplier-owens-minor-fight-or-embrace-amazons-threat\/","title":{"rendered":"Responding to e-commerce disruption: Should medical supplier Owens & Minor fight or embrace Amazon\u2019s threat?"},"content":{"rendered":"

Medical supplies is the next on Amazon\u2019s target list<\/strong><\/h4>\n

Needless to say that digitalization and online sales is a topic every industry pays attention to. [1] E-commerce, led by Amazon, is changing the game for every industry, including B2B services. Recently multiple news outlets reported that Amazon is increasingly focused on healthcare, medical supplies and pharma products. [2]<\/p>\n

Amazon launched its B2B marketplace, Amazon Business, two years ago and currently has more than 45,000 vendors transacting on the platform. It offers volume discounts, tax exemption options, and flexible shipping. The platform is one of the leading growth generators for Amazon, bringing $1 billion sales already in the first year. [4]<\/p>\n

Amazon is differentiating itself with fast and cheap delivery, and better customer service. [5] It has unmatched expertise and scale in delivering simple, commoditized products. The high volume medical consumables such as syringes, pumps, catheters, sutures, etc. fall into this category. [2] Furthermore, Amazon\u2019s transparent and competitive pricing model puts margin pressure on all medical suppliers. [3]<\/p>\n

\u00a0<\/strong><\/p>\n

Owens & Minor is first mover in embracing the new era<\/strong><\/h4>\n

Owens & Minor, a large US and Europe-based healthcare logistics company generated $9.7 billion sales in 2016, an amount sizeable enough to be interesting for the $136.0 billion sales generating giant. [7] Owens & Minor\u2019s main business is to deliver medical supplies to healthcare providers. They are in the middle of the value chain between the OEMs and the GPOs \/ providers \/ pharmacies. [3] Consequently, companies like Owens & Minor face the strongest pressure from Amazon. Additionally, Owens & Minor has to face such a threat in an increasingly turbulent market where there is strong horizontal and vertical consolidation, regulatory price pressure (instability around Medicare and Medicaid), and squeeze from OEMs and providers alike. [3]<\/p>\n

Owens & Minor was one of the many B2B companies and among the first movers within medical suppliers to acknowledge and react to the Amazon threat by partnering with the e-commerce giant. In the below video [8] Tom Michell, VP of Emerging Channels at Owens & Minor talks about the benefits of becoming an Amazon Business partner: being closer to existing customers, reaching a wider buyer base, and providing high-end, convenient delivery services.<\/p>\n

https:\/\/www.youtube.com\/watch?v=QvmFyC5w1x0<\/a><\/p>\n

On the long-run, fighting back might be a better choice<\/strong><\/h4>\n

Partnering with Amazon might be beneficial due to increased sales and decreased logistics management efforts, but these benefits are only available in the short term. Owens & Minor already saw revenue and margin decrease of 5.2% and net income drop of 22.2% in the first quarter of 2017 compared to the first quarter the previous year. [4] Value to end-consumers is at the center of Amazon\u2019s mantra and in many cases this means shrinking margin pools within the value chain. Its strong price pressures is in many cases at the expense of its vendors.<\/p>\n

Consequently, medical suppliers such as Owens & Minor should instead build a more sustainable strategy: create their own marketplace and partner with other players. They should provide all the benefits Amazon offers (including fast delivery, convenience, and transparency on pricing) but should also leverage their knowledge of the industry dynamics and needs of each player and tailor the marketplace specifically to the healthcare market. [3]<\/p>\n

Even though this requires fact actions, Owens & Minor can bank on its capability and knowledge edge in this highly complex industry:<\/p>\n