Growing companies rely on essential business supplies to keep operations buzzing, whether it’s ink cartridges, paper products or caffeinated beverages — products ordered with frequency via corporate accounts at Staples, Costco and others.
Amazon Business has muscled into this space, earning $1 billion in its first year, and a whopping $10 billion in year four. The B2B business that launched in 2015 is on a growth trajectory to reach $25 billion by 2021, analysts project.
“We are pretty encouraged by the results,” said Rob Green, director of business development for Amazon Business, the online marketplace that sells business supplies to corporate buyers. Green heads up a unit whose growth outpaces both the Amazon consumer marketplace and Amazon Web Services (AWS), which took seven years and 10 years, respectively, to reach that $10 billion milestone.
Green detailed why Amazon Business launched four years ago and the cues it takes from consumer buying behavior during a presentation at the June IRCE@RetailX conference in Chicago. He provided a glimpse at how Amazon Business intends to dominate the U.S. e-commerce business goods procurement market that Forrester projects will grow to $1.8 trillion by 2023 — and he touched on global expansion, too.
We took the fundamentals of the consumer experience — pricing, selection, convenience — and brought this to business procurement.
Rob Green, director of business development for Amazon Business
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Now live in the United States and seven other countries (United Kingdom, Germany, France, Italy, Spain, Japan and India), Amazon Business offers more than 100 million products with business and quantity pricing from hundreds of thousands of sellers around the world, Green said. In the United States, the platform is used by 55 Fortune 100 companies, nearly 80% of the 100 largest educational institutions, more than half the 100 biggest hospital systems and more than 40% of the most populous local governments.
“Whereas we are seeing B2C [business to consumer] growth rates moderate as we go forward, we think B2B e-commerce growth rates will accelerate, which represents a great opportunity,” Green said. “We think third-party sellers are going to be an increasing important ingredient driving growth.” Third-party sellers are those companies using the Amazon platform to sell to consumers, as opposed to companies that sell their goods to Amazon as a wholesale partner.
Amazon Business, successor to the AmazonSupply business-to-business (B2B) marketplace, launched in response to consumer behavioral cues, he said.
“You’ve heard Amazon loves to start with the customer and work backwards. We saw a lot of business buyers leveraging their personal [Amazon] accounts on behalf of their businesses. So we leveraged that signal to think: How could we better serve those business buyers?” Green said. “We took the fundamentals of the consumer experience — pricing, selection, convenience — and brought this to business procurement.”
To help simplify and streamline the process for buying business supplies, the platform introduced a variety of payment options (credit, purchasing card, and pay-by-invoice); supplier consolidation tools, exclusive business pricing and discounts on five million products and Business Prime, featuring the same free, two-day shipping benefits consumers get with their Amazon Prime membership, along with advanced analytics and purchasing policy control tools.
Centralizing business procurement is particularly useful in tracking the “tail spend” space, Green noted. Tail spend refers to the estimated 20% of business spending that is not strategically managed and sometimes called “unplanned spending” that goes untracked. Lack of visibility into this tail spend category puts companies at risk of wasteful spending or even fraud. Examples include miscellaneous professional services like rush order printing and even gifts, those purchases made from numerous suppliers by multiple employees within an organization – making it hard to track.
“It’s very unwieldy to manage tens or hundreds or thousands of tail suppliers so the opportunity to consolidate those tail suppliers in one purchasing location on Amazon Business is a great benefit to business buyers,” Green said.
While paper products, ink cartridges and janitorial supplies are popular purchases made on Amazon Business, sellers of consumer goods should also explore the platform, Green said.
“Many of you may be thinking: ‘Consumer products? How would a B2B opportunity be relevant to what I do?’” After a short pause, he said, “Think about your own business-buying behaviors and the breadth of selections you purchase on behalf of your business. It ranges across broad categories. Business buyers buy a lot of consumer-oriented products, as well as B2B products, so while your products might be consumer-oriented, they could very well play into the Amazon Business space.”
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