Amazon Proves the Potency of the B2B Marketplace Model – On Pace for Over $10 Billion Annually
As Amazon crossed the $1 trillion market valuation milestone in September 2018, its B2B affiliate Amazon Business touched the $10 billion mark. As Amazon’s stellar business growth and capacity for reinvention took the global spotlight, it became a compelling example of the ‘ambidextrous organization’. Through its ambidextrous quality, Amazon improves its existing business, while creating an organizational space to invent future businesses at the same time. As Amazon founder Jeff Bezos puts it:
“We want to be a large company that’s also an invention machine. We want to combine the extraordinary customer-serving capabilities that are enabled by size with the speed of movement, nimbleness, and risk-acceptance mentality normally associated with entrepreneurial start-ups.” What this tells us is that Amazon’s stellar growth and reinvention is every bit, ingrained company culture. Jeff Bezos champions customer obsession over competitor obsession. And in 2018, Amazon has turned that obsessive customer focus to its Amazon Business: its B2B Marketplace Model. As Amazon casts its looming shadow over the global B2B space, Amazon is revving up its legendary customer development reputation: fine-tunings its existing products, creating new B2B services and scaling into a resurgent, new marketplace.
B2B Ecommerce is Booming for Amazon
First things, first. B2B Ecommerce is growing faster and has a larger market than B2C. What this means is that B2B eCommerce is today twice as big as B2C ecommerce. A Forrester study predicts that the B2B e-Commerce market will be worth $1.1T compared to the B2C market at $480B by 2019. Consider this fact in the light of the Market data leader eMarketer estimates that the global ecommerce market sales will reach the $4 trillion mark in global sales by 2020.
The Amazon strategy is clear. It is moving into B2B ecommerce space by targeting specific industries and growing exponentially as this infographic by Mirakl shows:
A recent Bloomberg Quint features quotes Amazon as saying its business sales are on pace for $10 billion annually. According to the article: ‘Schools, hospitals and governments have quickly embraced Amazon.com Inc. as a go-to source for supplies, propelling the company’s three-year-old business platform into a $10 billion annual enterprise. Its success may soon provide as much revenue as the Amazon Web Services cloud-computing division and its digital-advertising services… Sales volume for Amazon Business will exceed $25 billion by 2021, according to analysts at Robert W. Baird & Co. Inc.’
B2B Markets Growing More Competitive
Amazon Business exemplifies the Seattle giant’s move to create new revenue, while maintaining a double-digit growth rate to achieve annual sales of over $200 billion in 2018. It taps into the company’s existing warehouse and delivery network built for its retail customers. And it follows the retail model of offering one-site shopping for hundreds of millions of goods, with computer keyboards, janitorial supplies, office supplies and break-room snacks among the top categories.
In the U.S., Amazon Business customers now include schools, hospitals, more than half of the Fortune 100 companies and local governments, who see Amazon Business as a go-to source for supplies. This has propelling Amazon Business’ three-year-old business platform into a $10 billion annual enterprise. Given the B2B Ecommerce impetus, Amazon Business could soon provide the same revenue as the Amazon Web Services cloud-computing division and its digital-advertising services.
Site Operators Need to Think Big Picture
It is apparent now that Amazon Business is a clear and present danger to the retail old guard. The Amazon Business shadow looms large above the traditional markets of Staples Inc., Costco Wholesale Corp., WW Grainger Inc. and many other smaller specialty distributors. Businesses are shifting their supply-shopping online from less effective methods such as catalogs, faxing orders and telephoning sales representatives. Forrester Research Inc. predicts that by 2020, 12.1 percent of $9.39 trillion in business-to-business spending will be online.
Let us look at this globally; Amazon Business now operates in the U.S., Germany, U.K., Japan, France, Italy, Spain and India. Amazon’s consumer retail business operates in those countries plus Australia, Brazil, Mexico and the Netherlands, highlighting potential places for further expansion.
There is a groundswell of change as millennials become the most significant demographic group in today’s global B2B markets. The millennial buyer is here. As millennials step into decision making roles, they will begin to re-evaluate long-standing relationships and legacy processes or procedures in the B2B space. As it turns out, over 73% of millennials are already decision makers in purchase products or services for their companies or their own businesses. Over 34 percent are the sole decision-makers for their company’s purchases.
Millennial B2B buyers cite Internet search and vendors’ websites as their two top means of researching products and services. Further, 82 percent of millennial B2B buyers said mobile devices were important when researching new products and services. The Millennial B2B buyer harvests information up-front from social networks, videos, blogs, podcasts, etc.
And, millennials love marketplaces.
B2B site operators the world over have taken the decision to fight marketplace with marketplace. Their solution: to build their own marketplaces to fend off incursions from ecommerce marauders who consume traditional markets. As a B2B site operator running your own marketplace you are focused on offering expanded selection, more product categories, and a better overall user experience. It is not about being the one-stop-shop for everything. It is about being the one-stop-shop for what your users seek to accomplish in the context of your offerings.
Owning your own B2B marketplace endows you with nimbleness and flexibility for you to move quickly into new areas to take advantage of trends and seasonal opportunities. With a B2B marketplace, you can cross sell and up-sell creating new customer markets and profitable product categories. Once you’ve built an ecosystem, you go beyond the traditional retail model to create a top notch customer experience and responsiveness.
If your organization is considering implementing the online marketplace model, please reach out to our marketplace experts at email@example.com.