Amazon.com, Inc. (AMZN) already prints money through its e-commerce site focused on consumers. Now the Seattle-based company's site focused on corporate businesses could turn out to be a money-spinner as well.
Amazon Business, the company's site focused on businesses, reportedly earns more than $1 billion in revenue and has a monthly growth rate of more than 20%. It boasted 400,000 members on its platform last year and has 9 million product listings (Amazon.com carries 368 million product listings). The site was launched in 2015 and is a reinvented version of AmazonSupply.com. Apart from the U.S., the site is now available to businesses in the U.K. and Germany as well. (See also: Top 10 Companies Owned by Amazon.)
In addition to the usual assortment of features, such as electronic invoicing, the site incorporates procurement software and automatic workflows for order approval to enable faster processing. It also offers free one-day shipping to customers in the United Kingdom, and Amazon Prime members with an account on the platform get free shipping. According to Prentis Wilson, vice president of Amazon Business, the site charges an average commission of 15% per order. In an interview with Business Insider, Bill Burkland, Amazon's head of business in the U.K., compared Amazon Business' revenue prospects with the company's cloud business, Amazon Web Services (AWS), whose revenue has exploded in recent times. (See also: What Is Amazon Web Services and Why Is It So Successful?)
Amazon's move will have serious implications for buyers as well as suppliers of industrial parts. A recent Goldman Sachs report states that the "value proposition of the industrial distributor is not keeping pace as new entrants like Amazon are disrupting traditional models. As a result, we see $130 billion of industrial distributor TAM (total addressable market) on the line."
Amazon is copying its consumer site playbook by selling industrial products at significant discounts compared with other retailers. The Goldman Sachs report analyzed selling prices for the products of W.W. Grainger, Inc. (GWW), an industrial supply firm, and found that selling prices were much cheaper on Amazon's site compared with other retailer sites and even W.W. Grainger's own site. (See also: 5 Companies Amazon Is Killing.)