Amazon to Buy $400M in Kornit Digital Printing Equipment, Open New Merch by Amazon Facility
Amazon is set to significantly expand its digital and on-demand printing capabilities after reupping an existing agreement with Kornit, the Israeli manufacturer of high-speed inkjet printing equipment. Over the next five years, Amazon committed to buying $250 million in existing Kornit products, such as digital printers and inks, and $150 million in "future products." The deal totals $400 million.
The move is a big one for Amazon, which has been steadily and methodically building its digital printing capacity over the last several years. Most of that capacity has gone toward its Merch by Amazon service, a print on-demand platform that enables sellers to create and sell custom apparel and other merchandise decorated and fulfilled by Amazon.
We've covered Merch by Amazon and two related services—Amazon Custom and Amazon Merch Collab—at length, particularly where they stand in relation to the promotional products industry. Here's what we wrote in January of this year:
Separately, Merch Collab, Merch by Amazon and Amazon Custom aren’t all that worrisome for the promo industry. But if we view them in combination, each as a stepping stone to the next, we can sort of see the overall path taking shape. Factor in Amazon Business, the company’s booming B2B marketplace that offers everything from paper clips to bubble hockey machines and topped $10 billion in 2018 revenue, and it’s even clearer. The pieces are falling into place for Amazon to make a broader play for the B2B merchandise market. Even if this iteration of Merch Collab doesn’t catch on the way Merch by Amazon has, it might not matter.
We can view Amazon's new Kornit agreement as another stepping stone. According to Israeli newspaper Haaretz, Amazon plans to use the new equipment to expand into housewares, sports equipment and textiles, including upholstery and bedspreads. Most of these have greater implications for retail than for B2B or custom merchandise, but the expanded printing capacity and product offering will allow Amazon to more easily flip the switch should it ever choose to. The company has already hinted at its aspirations here.
“I can tell you anything that you can print on demand, we’re considering it,” Miguel Roque, director of Merch by Amazon, told Yahoo Finance in 2018. “The key thing is that we are able to produce it at scale, and with a degree of quality that we think both brands and customers will really be satisfied with.”
Whatever Amazon ends up doing with its new $400 million in digital printing equipment, it's definitely not slowing down on the custom merchandise side. The company announced in August that it will add a new Merch by Amazon on-demand printing and fulfillment facility outside of Phoenix, part of a huge expansion that will see it build 11 other new sites in the area. The company launched its first Merch by Amazon facility in 2015, followed by a second, 100,000 square foot facility in 2017. That same year, it purchased $150 million in digital textile printing equipment from Kornit. In July 2019, it received approval for an inkjet printing facility in Utah.
The pandemic has hurt or crippled businesses across industries, but Amazon has surged as consumers turn en masse to e-commerce. The company doubled its year-over-year Q2 net profit from $2.6 billion in 2019 to $5.2 billion this year. That reliance on e-commerce will likely continue, further strengthening Amazon's position in the market moving forward. Whether it will use this position and its ever-expanding digital printing capabilities to make a true play in the promotional products business remains to be seen, but it continues to assemble the infrastructure to make it happen.