Surging Amazon B2B Marketplace to Top $10B in Sales This Year

By Sean Norris

Amazon Business, the e-commerce titan's B2B marketplace for everything from staplers to suspenders, launched in 2015, replacing a previous iteration of the service known as Amazon Supply. That first year, Amazon Business generated a tidy $1 billion in sales. Just four years later, it's already set to top $10 billion.

That's according to a post published last Tuesday on the Amazon Business blog. In the post, Amazon said recent international expansion, a wide range of customers and an increasing number of third-party sellers (more on that later) contributed to the growth, but the bigger story is the breakdown of buyer markets in the intro paragraph. From the post:

In the U.S. alone, Amazon Business serves nearly 80 percent of the 100 largest enrollment education organizations, 55 of the Fortune 100 companies, more than half of the 100 biggest hospital systems and more than 40 percent of the 100 most populous local governments. Amazon Business also offers access to nearly 150,000 U.S. business sellers—hundreds of thousands globally—and hundreds of millions of products.

Those numbers are only surprising if you were cryogenically frozen in 1999 and are just now waking up, but it's impossible to understate their significance. In just four years, Amazon Business has made massive inroads into some of the largest B2B markets. Those buyers up there are all heavy-hitters in some of the largest B2B verticals, and Amazon has corralled them into one place on a platform specifically designed to all of their purchasing needs. It's not hard to see how that could become a problem for B2B companies not selling on Amazon Business.

And when we say "all of their purchasing needs," we're not exaggerating. Paper clips, mouse pads, desk lamps, polo shirts, sponges, paper napkins, cloth napkins, bow ties, coffee cups, 3-D printers, bubble-hockey tables—all are included in the "hundreds of millions" of items Amazon says are available on the service. The platform supports corporate purchasing cards and offers quantity discounts, business-only pricing, free two-day shipping, direct integration into e-procurement systems and tax-exempt purchasing for qualifying organizations. Businesses can even use it to buy employee gifts:

Treat your employees to something special this holiday season. Check out the Amazon Business Gift Guide for curated gift ideas: https://t.co/oWI05dN927 pic.twitter.com/YouEUeIVOL

— Amazon Business (@AmazonBusiness) November 22, 2017

So, yeah: $1 billion in sales and a growing stable of enormous B2B buyers, all in four years. And that's just the beginning.

According to CNBC, Colin Sebastian, an analyst for wealth management firm R.W. Baird, believes Amazon's B2B sales could eventually surpass its B2C sales. Considering Amazon's retail operation topped $170 billion in 2017, that's quite a projection. And it simultaneously highlights the size of the B2B market and the extent to which Amazon could potentially grow into and disrupt it. Sebastian expects Amazon Business to top $25 billion in sales by 2021, per Yahoo Finance. If it does, it will have grown its annual sales 2,400 percent in just six years.

That's where those third-party sellers come in. Amazon said they make up 50 percent of the current $10 billion B2B sales total. If Amazon Business indeed reaches that $25 billion projection (and maintains that 50 percent split), that's an enormous opportunity for third-party companies. And Amazon, for its part, seems to understand that those sellers are a necessary part of the equation.

"Our focus is on improving suppliers’ ability to reach more customers, and to make it easier for customers to buy from suppliers," Amazon wrote in the blog post. "Wholesale suppliers and distributors are just as much our customer as the end buyer."

But that's where it gets interesting. On the retail side, Amazon is already making a huge push to increase its private label offerings. It now has more than 70 of its own brands, all of which get priority placement in searches, at ultra-competitive price points. And the company has a treasure trove of data it's been using to target and refine its private-label efforts. There's always the possibility that Amazon will eventually do the same in its B2B marketplace, slowly increasing its own share of the market and squeezing out some of the third-party sellers that helped build the thing in the first place.

Also interesting is whether or not the company plans to integrate Merch by Amazon, its growing on-demand custom merchandise operation, into the Amazon Business marketplace (or if it already has). There are already a handful of promotional products companies selling through the platform. What would that mean for them, and for other promo distributors, if Amazon makes in-house branded merchandise services available through its marketplace? It certainly has the technical capabilities in place. And, now, it has a growing and captive roster of B2B buyers, enabled and incentivized to make all their purchases on the platform.

For now, at least, Amazon Business should be treated as an opportunity. This year, there was $5 billion up for grabs for third-party sellers. That's only going to increase, and promo companies would be wise to get in on the action if they can. Amazon isn't going away. We may as well find a way to get along.