It has been five years since Amazon Business began operating and, in that short period of time, the Seattle-based company has sold more than $10 billion worth of products to businesses, government, healthcare companies and educational institutions. And future projections seem to indicate that number will double in the next few years.
The roots of Amazon Business can be traced back to the founding of AmazonSupply, which began in 2012 before being absorbed into the new group three years later. Most distributors didn’t seem worried then about Amazon encroaching on the industrial business.
In fact, in 2014 I made a presentation to a group of some 200 distributors and manufacturers and asked if AmazonSupply had affected their business. Not one person indicated that it had. It would be interesting to ask those people today if they felt the same way.
Opinions regarding Amazon Business vary greatly. In one study, McKinsey and Company concluded that “Amazon may present the biggest risk to auto, electronic and general line distributors.”
The firm pointed out that “industrial distributors that don’t embrace e-commerce or don’t embrace it fast enough may lose sales to new and more nimble competitors such as AmazonBusiness.” It’s no wonder. Amazon may have accounted for in the US in 2019, according to eMarketer.
In a 2018, survey of some 220 distributors and manufacturers done by B2BEC News, nearly 40 percent of distributors said they sell their products on either Amazon or Amazon Business. Nearly another 14 percent said they expect to eventually start selling on Amazon or through another e-commerce marketplace.
So what does Amazon Business have planned? Obviously they are going to continue expanding. In fact, just last year an Amazon executive said that its B2B operations were growing faster than its consumer business, which is an astonishing comment.
And the business unit is not content to sit still. Just three months ago, AmazonBusiness expanded into Canada, its ninth country. It had already been selling in the US, Germany, United Kingdom, France, Italy, Spain, Japan and India.
There’s no doubt about the potential of e-commerce in the years ahead. Bank of America projects a total market for e-commerce of $1.4 trillion by the end of next year, double the firm’s estimate of $761 billion for consumer e-commerce.
In addition to Amazon Business, Amazon has quietly begun a new private-label line of commercial products that will compete with Kimberly-Clark and other brands, starting with bulk orders of toilet paper and paper towels, according to ADAge.
The e-commerce giant, ADAge said, quietly began offering the new brand, called AmazonCommercial, from an online store which appeared on Amazon.com in June 2019. Presently, there are only a handful of products under the new brand, including extra-large rolls of toilet paper, large stacks of paper towels and crates of tissues — the kind of paper goods typically found in office bathrooms.
Although this is a hit to janitorial and sanitary suppliers, it stands to reason that other product groups could be close behind.
So how are distributors responding? Some experts say distributors (and manufacturers) need to step up their e-commerce game. They need to make their web pages better organized and easier for purchasers to find products without lengthy scrolling. They must also emphasize their technical knowledge and vastly increase their service levels.
Other distributors may choose a different route (and many have) by using Amazon as their fulfillment centers.
Whatever decision distributors make, they’d better do it in a hurry. Because Amazon Business isn’t waiting for their response.
Jack Keough is president of Keough Business Communications. He was editor of Industrial Distribution for 26 years. You can reach him at [email protected].