Amazon’s forgotten vertical, Amazon Business

Source: John O'Leary, Thursday, May 16, 2019

Lost in the constant development of its many other offerings, Amazon Business, the everything store’s B2B offering, is a rapidly growing and highly relevant platform still largely untapped by many major manufacturers. Bank of America recently estimated that the US B2B ecommerce addressable market will reach $1.4 trillion by 2021, and Amazon is a leader in targeting this massive opportunity, selling into a space consisting of everything from medical supplies to office snack packs. One need only look at the breadth of offered categories to see how far AB has come.

At the end of 2018, Amazon Business reported over $10 billion in annualized sales, a 10X increase in 3 years, vastly outpacing the regular Amazon platform. The B2B ecommerce shopper is relatively underserved in terms of convenience and innovation compared to their B2C counterparts, giving Amazon and its shopper-first orientation a leg up in acquiring this important consumer. AB targets business shoppers looking for a convenient and price competitive solution. It has purchasing analytics and seamless procurement approval tools to streamline internal business supply buying in categories ranging from medical supplies to paper. Additionally, Amazon now offers Amazon Business Prime memberships for two-day shipping on eligible items.

Extending brands to B2B customers

This association with the well-known consumer brand reputation of Amazon aids in building new categories in the B2B landscape, as every B2B shopper is likely already accustomed to Amazon as a B2C shopper. Some brands have already taken advantage of this and invested in superior presence customized to the Amazon Business platform.

An additional advantage AB has over competition is its 3P marketplace. Much like the B2C side of Amazon, the marketplace of sellers vastly expands assortment depth and creates a highly competitive pricing dynamic, benefiting the shopper. Amazon indicated that over 50% of the $10 billion in annual sales was through 3P sellers. Business shoppers find the marketplace aspect of AB particularly helpful for managing “tail spend,” the long tail items that are purchased infrequently and tough to find in bulk with quantity discounts. Amazon Business, with its vast assortment, is a trusted first source for these types of orders that are difficult for procurement teams to shop for.

Capitalizing on the opportunity

Any supplier with significant interest in selling to businesses, large and small, should monitor their presence on the AB marketplace as part of regular Amazon operations. It is not just traditional “office supplies” that are popular on the AB platform. Everything from rare medical equipment to everyday essentials like paper towels is available there, making it a relevant sales channel for most CPG suppliers. Finally, suppliers should not limit AB planning to just the US. While Amazon Business is most developed in its home market, it is operational in many more, and aspires to rapid international expansion.

Recommendations for brands:

  • If your category is relevant to business shoppers, assign headcount to manage Amazon Business and begin dialogue with the Amazon Business team within Amazon
  • If you have strong B2B distribution into Amazon Business target customers, such as gas stations, restaurants, offices, or medical facilities, Amazon will value those contacts and seek to work with you to help acquire these customers for AB. Determine the risk/reward of competitively threatening your current distributor network but gaining strong early positioning with high potential Amazon Business
  • Take advantage of lower ad spend competition, dominating key search terms and display ads to set your key items up for long term digital shelf success in the AB silo
  • Win early with new AB shoppers, who are even more likely to reorder the same basket consistently, by making their initial list
  • Adapt product content for differences between the business shopper and the B2C shopper, considering which search terms they are more likely to use and which product attributes they will value
  • Determine your assortment strategy, with many suppliers opting to mirror SKUs across the two platforms, adding only a few AB-exclusive bulk items with related pricing discounts. This limits the number of new configurations you need to produce while offering a comprehensive assortment for the business shopper