Amazon's New Electronics Brand Competes with VARsBy Ericka Chickowski | Posted 2009-09-22 Email Print
AmazonBasics line will likely put pressure on the entire channel as price-sensitive smaller companies and IT shops opt for the new Amazon accessory options instead of those bundled together with low-margin hardware sold by their VAR.
Amazon announced late last week that it will sell a new private-label collection of optical media, cables and other consumer electronics accessories in a gambit that’s sure to rile the channel.
Known as AmazonBasics, the new line adds another layer of competition in a product niche known to offer VARs particularly good margins.
"We saw an opportunity to create a line of consumer electronics basics that combine quality and low prices for an overall focus on value," said Paul Ryder, vice president of Consumer Electronics for Amazon.com. "We drew on our history of developing other private-label brands and combined that with our mission to give customers the ultimate in selection and value. AmazonBasics is the result."
Amazon did not comment on how it will handle competition between the VARs that use its storefront to resell what are essentially the same products under the manufacturer’s label. Regardless of whether VARs utilize Amazon or not, the new AmazonBasics line will likely put pressure on the entire channel as price-sensitive smaller companies and IT shops opt for the new Amazon accessory options instead of bundled together with low-margin hardware sold by their VAR.
"I don’t see this as spelling doom for the VAR channel, but I do see that it will increase channel conflict," says Christina Richmond, a channel analyst for IDC. "It does start to horn in on the VARs."
Richmond says she’s hardly surprised by this latest move by Amazon.
"It’s not a surprise to me, especially as things move toward the cloud and toward more hosted environments," she says. "The telcos and service providers like Amazon have already been starting to sell hardware and I think it’s a natural evolution and the next step."
For those within the channel, this should be seen as yet another sign that old-school box movers need to start thinking about how to maintain relevance in a shifting marketplace. This starts by moving sanely toward a services model, she explains.
"It is necessary that they move toward services close to their core competency. I mean, if they're already a hardware reseller of some type, the next step would be reselling services around integration , implementation, and even a little bit more advanced services around assessment and design, around whatever the hardware it is that they’re selling," Richmond says. "They have to make that next step to remain relevant."