Jeff Bezos Moves Amazon into the $7.2 Trillion World of Business to Business Ecommerce
The almost unnoticed arrival of AmazonSupply, Amazon’s business to business ecommerce site targeting a $7.2 trillion industry is potentially their most disruptive move since books.
AmazonSupply Targets $7.2 Trillion B2B Ecommerce
We all know Amazon, the world’s largest online retailer, is extremely ambitious. But whilst our focus has recently been concentrated on their more glamorous and high-profile moves – smartphones, original media content, streaming deals with HBO, same day delivery and aerial drones – it is the distinctly un-glamorous AmazonSupply that we should be watching.
Launched almost unnoticed in April 2012 Amazon’s business to business ecommerce site targets the lucrative wholesale and distribution market; a market worth, according to the most recent U.S. Census, $7.2 trillion.
Built on their acquisition of Small Parts, Inc. in 2005, AmazonSupply offers a wide variety of parts, supplies and materials to governments, private business and commercial customers. Their product list has grown from 500,000 items for sale at launch to more than 2.2 million two years later, offering businesses anything from power tools and nuts, bolts and fasteners, to car parts, motors, and scientific products and equipment.
Disrupting the Market
But what makes this interesting is the fact that business to business ecommerce is not a traditionally competitive market. There are currently only 160 of the 35,000 distribution firms in the U.S. that take more than $1 billion in sales annually, and the average wholesaler sells only 50,000 products online.
AmazonSupply, with its ready-built infrastructure, fulfilment and logistics capabilities, and their understanding of the online consumer, has the power to completely disrupt the market.
Just in the U.S., Amazon has a continually growing network of 40 fulfilment centres, and AmazonSupply is in a position to ship to over 50 countries worldwide, offering 24 hour delivery. And their easy to find, easy to use, and easy to navigate websites with product videos, downloadable drawings, and user reviews positions them at the front of B2B ecommerce.
Growing Seeds into Trees
Their competitive advantage also lies in their size. It is not public how much Amazon is spending on AmazonSupply, but there are estimates of an operating loss of up to $455 million next quarter. But as they have proved time and again, short term profit has never been of interest, and any loss created by AmazonSupply can be comfortably shouldered.
This means AmazonSupply is also able to promote prices about 25% lower than the rest of the industry as they can afford to sell products at a loss to accomplish their long term goals; market share and customer loyalty. AmazonSupply also has the financial ability to take on more niche inventory which there is no pressure to sell fast.
Jeff Bezos has planted a seed and now has the patience to wait for it to grow into a tree. But it would seem the future up against a fast-growing AmazonSupply could be bleak.
A great success. Beware though risks of monopoly cultural business