Startups Disrupting The Massive Industrial Supplies Sector

By Alex Moazed

Industrial supplies wholesaling in the US alone is expected to reach a staggering market size of $83.3bn in 2020 (up from $75bn in 2015). The size of the industrial supplies market coupled with its high fragmentation profile, provides almost a perfect environment for startups to come in and connect the many suppliers with clients looking for a “solve-it-all”, “have-it-all” platform. The opportunity is huge and is up for grabs.

Industrial supplies b2b marketplaces are less mature than other verticals of b2b marketplaces. The reason for this is possibly because industrial supplies is one of the easiest targets for new b2b marketplace entrants like Amazon Business to attack. In addition to the fact that the incumbent MRO distributors are relatively the most advanced in their eCommerce evolution compared to the rest of the incumbent distributors in other verticals. So, if the startups are less mature and an incumbent distributor wants to accelerate its marketplace transition, what are they to do?

Fortunately for incumbent distributors, many of them have decent, multi-billion dollar eCommerce sales. Some of them have enough demand to entice third party sellers to list inventory and become a marketplace. Others do not have enough demand to focus on supply.

Accelerate Digital Demand

For the latter group, they have to generate more digital demand. A good strategy is to provide eCommerce infrastructure to smaller, MRO distributors. We have written about this strategy in the past here. A subset of the SaaS startups in our landscape have the infrastructure to execute upon this strategy. By subsidizing the cost of eCommerce tools for smaller distributors, this strategy allows the incumbent distributor to standardize the inventory from smaller distributors into a centralized marketplace. 

Another strategy to accelerate digital demand is to acquire a complimentary eCommerce business. There are large eCommerce MRO distributors that don’t have a marketplace business, but they have a lot of digital demand. We have not listed all of those businesses in this landscape as they are not all startup businesses. 

Expand Third-Party Supply

For the distributors that are fortunate enough to have sufficient digital demand, they can now focus on how to expand their product catalog by attracting third party sellers. Another subset of the SaaS startups in our landscape provide tools to third party sellers. These tools provide inventory management, pricing recommendations, product recommendations and more. These tools charge a SaaS fee to a third party seller. By acquiring one of these businesses, an incumbent distributor can provide the tool for free in exchange for access to a network of third party sellers who will hopefully incorporate their inventory into the incumbent distributor’s up-and-coming marketplace business.

The Industrial Supplies Startup Landscape

Download the full report to see all companies’ names.

In this report we analyzed startups with three different business models:

• Marketplaces, those that connect buyers and sellers. A great example of this is Hitched, which has raised $5.5 millions in investments so far.
• eCommerce, those that hold their own inventory. An example of this business model is Second Nature that has already raised $34.7 millions.
• SaaS tools like Feedvisor enable companies to optimize and better organize their operations.

Click here to download the full report and read an in depth analysis of the Industrial Supplies Tech industry, including a funding and valuation analysis, the landscape broken down by marketplaces, ecommerces and SaaS enterprises, and the profiles of notable startups.

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