Amazon’s Business-to-Business Unit Turns into a $10 Billion Business

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Amazon package

Amazon.com is having some luck getting buyers of corporate office supplies to shop like teenagers armed with their parents’ credit card.

Amazon Business, the company’s business-to-business sales program, is on track to post sales of more than $10 billion over 12 months, assuming the company keeps up the pace it recorded between June and August, Amazon said this week.

That’s up from the cumulative $1 billion sales reached before the end of the program’s first year, in 2016, a sign of the Seattle company’s success in selling to corporate procurement offices, and the manufacturers that supply them.

Amazon grew into a retail giant by expanding into ever larger slices of online consumer retail, using expertise built up selling books and media to break into categories like housewares, electronics and auto parts.

Six years ago, the company set off to replicate that success with corporate business. It launched a precursor to its business-only shopping portal, rolling out custom features designed to please corporate buyers who might otherwise rely on competitors like Office Depot or specialty suppliers.

For a company that routinely sets its sights on huge markets, the opportunity is appropriately enormous. Research company Forrester reckons U.S. online business-to-business sales will reach $9 trillion this year.

“It’s not the most obvious part of the market, and I don’t think it’s always been the priority for (Amazon), but they’ve managed to scale it up over time,” said Neil Saunders, who tracks the market at GlobalData Retail. “They’ve made a very concerted effort to get into the B2B space.”

Prentis Wilson, an Amazon vice president who oversees Amazon Business, listed signs of the program’s heft: Amazon Business buyers include 55 of the Fortune 100 companies, and more than half of the 100 biggest U.S. hospital systems.

Overall, the program has “millions” of customers, he said, sticking to Amazon’s frequent preference for releasing information about its services in broad strokes rather than with specific figures. The company also declined to say whether the program was profitable.

Amazon Supply went live in 2012, the year after Wilson joined the company.

At launch, it wasn’t fully baked, lacking pay-by-invoice, a requirement for companies used to buying with IOUs instead of credit cards, and some common management tools.

Wilson today describes Amazon Supply as a trial effort to see where the company should focus. “Think of it as a Kickstarter, if you will,” he said. “There was always a plan to add a much broader set of capabilities.”

Supply was rebooted as Amazon Business in 2015, and Amazon has spent the years since adding features to appeal to a larger pool of potential customers.

Wilson also focused his team’s efforts on large market segments, including educational institutions, health care and government customers.

The last of those has made Amazon a target of some critics.

The Institute for Local Self-Reliance, a nonprofit research organization, published a paper in July raising concerns about Amazon’s attempts to sell to governments, highlighting deals with Amazon that it said violated norms of procurement designed to protect taxpayers and foster open competition.

With one contract, between Amazon and U.S. Communities, a cooperative of government purchasing groups, the company was trying “to position itself as the gatekeeper between local businesses and local governments,” the report said. “As it does so, it’s undermining competition and fortifying its position as the dominant platform for online commerce.”

Wilson said the contract adhered to procurement rules, and that the Amazon Business marketplace was designed to offer low prices and connect buyers and sellers who might not have easy access to one another through other procurement networks.

Integral to that pitch is Amazon’s Marketplace, its network of third-party sellers who, in exchange for giving Amazon a cut of sales that lands at 15 percent for most categories of goods, list their wares on Amazon’s website.

Sellers that meet customer service and other criteria can list their items for Amazon Business customers. Wilson said there were more than 100,000 such Amazon Business marketplace sellers globally (in addition to the U.S., Amazon Business is offered in Britain, France, Germany, India, Italy, Japan and Spain). The $10 billion sales run rate includes the sales by such third-party sellers.

(SOURCE: TNS)

(Article written by Matt Day)