Amazon is having some luck getting buyers of corporate office supplies to shop like teens armed with a parent’s credit card.
Amazon Business, the company’s business-to-business sales program, is on track to post sales of more than $10 billion over 12 months, assuming the company keeps up the pace it recorded between June and August, Amazon said this week.
That’s up from the cumulative $1 billion sales mark reached before the end of the program’s first year, in 2016, a sign of the Seattle company’s success wooing corporate procurement offices, and the manufacturers that supply them, to its online bazaar.
Amazon grew into a retail giant by expanding into ever larger slices of online consumer retail, using expertise built up selling books and media to break into categories like housewares, electronics and auto parts.
Six years ago, the company set off to replicate that success by grabbing a share of the corporate wallet. It launched a precursor to its business-only shopping portal, rolling out custom features designed to please corporate buyers who might otherwise rely on competitors like Office Depot or a specialty supplier.
For a company that routinely sets its sights on huge markets, the opportunity is appropriately enormous. Research company Forrester reckons U.S. online business-to-business sales — everything from bulk orders of PCs to office supplies and industrial machinery — will reach $9 trillion this year.
“It’s not the most obvious part of the market, and I don’t think it’s always been the priority for [Amazon], but they’ve managed to scale it up over time,” said Neil Saunders, who tracks the market at GlobalData Retail. “They’ve made a very concerted effort to get into the B2B space.”
Vacasa, a vacation rental management company, represents a tiny fraction of Amazon’s growth.
Employees of the Portland firm for years used Amazon for purchases to keep homes in working order, buying a light bulb or a part for a broken dishwasher on the Amazon retail site when they couldn’t drive to hardware store.
A couple of years ago, nudged by an Amazon sales rep, Vacasa started to centralize that largely unplanned spending into an Amazon Business account. That portal opens business-only options, like bulk pricing discounts, shipping, and invoice management, as well as integrations with corporate purchasing and record-keeping software.
Bob Milne, Vacasa’s chief operations officer, said Amazon purchases account for about 14 percent of the company’s supply spending. “That number has increased dramatically” in the year he’s been at the company, Milne said. “I would suspect that goes over 20 percent here in the next year.”
Prentis Wilson, an Amazon vice president who oversees Amazon Business, says his group’s growth has come from similar shifts as businesses formalize Amazon spending that their employees were doing already, as well as from corporate buyers new to Amazon.
In an interview at the company’s South Lake Union headquarters, he rattled off other signs of the program’s heft: Amazon Business buyers include 55 of the Fortune 100 companies, and more than half of the 100 biggest U.S. hospital systems.
Overall, the program has “millions” of customers, he said, sticking to Amazon’s frequent preference for releasing data about its services in broad strokes rather than specific figures. The company also declined to say whether the program was profitable.
“We continue to pick up momentum and scale,” Wilson said.
Wilson, who previously ran corporate sourcing for Cisco from Hong Kong, had his professional introduction to Amazon through Jeff Wilke, now the chief executive of Amazon’s consumer business.
Alumni of graduate programs at the Massachusetts Institute of Technology, the two would run into each other at governing board meetings and occasionally talk shop. During one return trip to Hong Kong, Wilson made a stop in Seattle to see what Amazon was building.
Amazon Supply went live in 2012, the year after Wilson joined the company.
At launch, it wasn’t fully baked, lacking pay-by-invoice, a requirement for companies used to buying with IOUs instead of a credit card, as well as some common management tools.
Wilson today describes Amazon Supply as a trial effort to see where the company should focus. “Think of it as a Kickstarter, if you will,” he said. “There was always a plan to add a much broader set of capabilities.”
Supply was rebooted as Amazon Business in 2015, and Amazon has spent the years since adding features to appeal to a greater pool of potential customers.
Wilson also focused his team’s efforts on large market segments, including educational institutions, health care and government customers.
The last of those has made Amazon a target of some critics.
The Institute for Local Self-Reliance, a nonprofit research organization that aims to boost local communities, published a paper in July raising concerns about Amazon’s move to sell to governments, highlighting deals with Amazon that it said violated norms of procurement designed to protect taxpayers and foster open competition.
With one contract, between Amazon and U.S. Communities, a cooperative of government purchasing groups, the company was trying “to position itself as the gatekeeper between local businesses and local governments,” the report said. “As it does so, it’s undermining competition and fortifying its position as the dominant platform for online commerce.”
Amazon’s Wilson said the contract adhered to procurement rules, and that the Amazon Business marketplace was designed to offer low prices and connect buyers and sellers who might not have easy access to one another through other procurement networks.
Integral to that pitch is Amazon’s Marketplace, its network of third-party sellers who, in exchange for giving Amazon a cut of sales that lands at 15 percent for most categories of goods, list their wares on Amazon’s website.
Sellers that meet customer service and other criteria can list their items for Amazon Business customers. Wilson said there were more than 100,000 such Amazon Business marketplace sellers globally (in addition to the U.S., Amazon Business is offered in Britain, France, Germany, India, Italy, Japan and Spain). The $10 billion sales run rate includes the sales by such third-party sellers.
One of them is Atlanta Light Bulbs, which joined the platform early this year after a local government client mentioned they wanted to centralize their purchasing on Amazon.
The business sells from physical showrooms, and has sold online since 1999. But the request from a customer, combined with a perception gleaned from the trade show circuit that Amazon had grown into the default option for most buyers online, spurred Doug Root, co-owner and company president, to sign on.
“They really grabbed a hold of the market,” he said. “We kind of came to the realization that we needed to do it. They take fees, and introduce us to a new world and new customers.”
Business sales, which account for about a fifth of Atlanta Light Bulbs’ sales on Amazon, can be more lucrative than individual retail sales, Root said. After accounting for shipping and Amazon’s take, the company might break even or lose some money on an individual light bulb sent across the country, he said. That’s not an issue when a business comes in and orders a set of 30.
“All that stuff of the ‘good old days,’ people don’t do business like that anymore,” Root said. “People don’t want a guy to come into their office and bring doughnuts and tell them about their latest product line. They say ‘I want to go online and have that stuff tomorrow.'”
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