In January 2018, ProcurementIQ published an article outlining the increasing success of Amazon Business, Amazon’s B2B procurement platform that launched in April 2015. The platform has come a long way since its first year (and even since last year), increasingly influencing the procurement space with new features and innovation. And, as you may expect, it doesn’t look like its growth will slow any time soon. In fact, Amazon disclosed in a blog post last September that Amazon Business is on target to reach a total of $10 billion in sales over the next 12 months.
This figure is unarguably impressive, considering Amazon Business only generated $1 billion in sales its first year. Even more impressive is that this growth surpasses that of Amazon’s other businesses, including its consumer marketplace, which took seven years to reach $10 billion in sales. Furthermore, according to Colin Sebastian, an analyst at R.W. Baird, Amazon B2B has the potential over the long term to completely surpass the size of the core B2C segment.
Amazon’s Growing Client Base
While Amazon has not disclosed whether Amazon Business is profitable, at this point the company’s reach is unquestionable. Vice President of Amazon Business, Prentis Wilson, revealed that users of the platform include 55 of the Fortune 100 companies and more than half of the 100 biggest US hospital systems, and this is just a slice of the millions of customers that the program reportedly services.
Wilson also claims that many of these businesses have been using Amazon for their procurement needs for much longer than Amazon Business has been official; the platform just formalized this function. Then, as word got out, other corporate buyers new to Amazon jumped on board, proving there were needs in the procurement space being unmet.
Some of these needs that Amazon Business claims to fulfill are price savings, fast and easy shipping, multiuser accounts, flexible payment options and a breadth of product options. Moreover, if the user already has an Amazon Prime account, the program is absolutely free to use. These features are attractive when compared with traditional procurement software, which can be expensive and hard to maintain. Thus, to many businesses, Amazon’s user-friendly platform and costs savings are extremely valuable.
Amazon Adds More Value
In October of last year, Amazon announced a range of new capabilities added to the platform, including spend visibility, guided buying, more payment capabilities (such as rebate and working capital solutions) and improved shipping options. According to Amazon’s blog post mentioned above, the most notable of these new perks are probably the spend visibility and guided buying features. Powered by AWS QuickSight, Amazon’s spend visibility feature delivers cutting-edge reporting and graphics that give insight into the user’s spending habits, while the guided buying feature enables account administrators to label certain suppliers, items and pricing as preferred or restricted so that employees can better follow company policies and recommendations.
Sundar Raghavan, director of product and technology at Amazon, claims these features were developed after in-depth inquiry into their users’ needs. Their discussions with VPs and procurement managers from companies small and large revealed that most needs were consistent across the board. In the blog post, Raghavan writes that companies “were ready for something new that could blend the ease and shopping convenience of Amazon with policies and compliance rules specific to businesses.”
Keeping up with Amazon
While many businesses are thrilled with Amazon Business and the innovative services it offers, others are less so. It’s no surprise that competitors are finding it nearly impossible to contest with the ecommerce giant that is Amazon. For example, in July of last year, The Institute for Local Self-Reliance, a nonprofit research organization whose aim is to promote local communities, published a report outlining concerns about Amazon’s purchasing deals, such as those with government sectors. The report accused the company of violating standards of procurement set to protect taxpayers and stimulate healthy competition. However, Amazon’s Wilson denies these allegations, assuring the public that the called-out contract adhered to procurement rules.
If one thing is clear, it’s that the way procurement departments do business is quickly evolving. According to a statistic posted by Blue Corona, B2B ecommerce sales are expected to outgrow B2C ecommerce sales by 2020. It’s only natural that Amazon and its competitors will try to step up to the plate to grab a share of the growing capital that B2B purchasing is projected to cultivate in the economy.
By: Mara Michael
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