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Amazon Business Hits $1 Billion in Sales in First Year

Amazon Business Hits $1 Billion in Sales in First Year

By Jack Keough

A year ago, when Amazon launched Amazon Business to target business customers, there were many skeptics who wondered how successful the new enterprise would be.

Those questions have been answered now that Amazon Business says it has sold more than $1 billion of products, many of them to small and mid-size businesses, but also to some Fortune 500 customers.

Amazon Business, the successor to Amazon Supply, says it has 300,000 registered business accounts, up from 200,000 at the end of the year. It is growing more than 20 percent a month with thousands joining daily and new businesses added every week on both the buy side and sell side. Reportedly, the company has well more than 30,000 sellers on its site.

The business unit sells to businesses, manufacturers, hospitals, institutions, schools and hundreds of others.

“Buying at Amazon through Amazon Business saves businesses a lot of time and it also helps them lower their cost,” Prentis Wilson, VP of Amazon Business, told Business Insider.

“We’re bringing technology to businesses and we’re helping them buy the way they’ve been asking for for a while.”

The site offers bulk discounts and exclusive items to business owners that are not available on the regular Amazon website. In addition to discounted prices, Amazon provides free two-day shipping to eligible corporate customers for any order over $49.

Amazon Business says it is focused on finding ways to streamline business transactions between buyers and sellers.

One currently under testing, according to Internet Retailer, is an electronic invoice system in which customers can buy products from multiple sellers on Amazon Business and get one invoice. Customers pay Amazon Business, which then pays each supplier included in the invoice.

It is also beta testing a way to extend lines of credit to businesses that register on its platform. These lines of credit could range from tens of thousands of dollars up to $1 million, Wilson said.

“We see a significant opportunity to serve business customers,” he said. “The fact that we’ve hit a billion dollars in the first year shows the potential.”

To emphasize its commitment to the B2B sector, Amazon Business intends to increase its marketing efforts to businesses.

Amazon previously had been reluctant to talk about Amazon Business, but some information regarding the unit came to light during a recent federal court hearing regarding the Staples-Office Depot proposed merger.

The court case resulted when the Federal Trade Commission had blocked the merger.

The attorney for Staples argued during the hearing that it was fearful of Amazon Business entering the office supplies sector, which it announced it would do in 2015.

Wilson’s testimony in that case, according to Reuters, appeared to support the FTC’s argument that Amazon Business could not provide the same level of services as Staples and Office Depot

Wilson testified that his business had few big corporate customers, did not stock shelves and often did not bid for a customer’s business.

Wilson said that Amazon Business responded to requests for proposals, which are essentially bids, only in a “limited way.” He said the unit does not create customized catalogs for companies and does not stock shelves for companies.

“At this point, Amazon Business does not negotiate contracts with large business customers,” he said according to the Reuters report.

It’s no wonder why Amazon Business is targeting the B2B market.

Business to business sales of electrical and industrial products, office supplies and thousands of other products used by businesses are an $8.2 trillion market in the U.S., and a natural extension to Amazon’s mostly consumer-focused marketplace, Fortune magazine says.

A 2014 study of the B2B market by the Acquity Group, a digital marketing company, found that 68 percent of B2B buyers now purchase goods online, compared to 57 percent in a similar study done the year before. Acquity reported that 17 percent of its buyers said they regularly used the Amazon Supply platform and 38 percent of B2B buyers used its service at least once per quarter.

And Forrester Research predicts that Amazon is likely to account for about 12% of U.S. business-to-business sales by 2020.

But the $1 billion in annual business sales still is a fraction of Amazon’s $63 billion North American marketplace sales. However, the growth of Amazon will dwarf even those numbers in the years ahead.

Chamath Palihapitiya, the well-respected Silicon Valley venture capitalist who founded Social Capital, thinks Amazon stock could multiply 10 times in the next 10 years.

Keough was the editor of Industrial Distribution magazine for more than 26 years. He often speaks at industry events and seminars. He can be reached at john.keough@comcast.net or keoughbiz@gmail.com.

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