Sales through Amazon Business are growing by an estimated 30% year over year, but suppliers admit there are risks to selling on the B2B marketplace.

More than 200,000 businesses ranging in size from small organizations to Fortune 500 companies purchase products through the Amazon Business B2B marketplace, Amazon.com Inc. announced during its recent fourth quarter 2015 earnings call.

“It’s still early, but we’re encouraged,” said Brian Olsavsky, chief financial officer in a conference call with stock analysts, according to a transcript of the call from Seeking Alpha. “We think we’re creating a lot of value for our business customers.”

But, what value, exactly, is Amazon Business creating? The B2B marketplace is popular. The gross transaction value of products sold over Amazon Business is projected to grow about 30% year over year, from about $4 billion in 2015 to $5.2 billion in 2016, says Scot Wingo, CEO of ChannelAdvisor Corp., which helps companies sell through e-marketplaces. Amazon’s marketplace where outside merchants sell on Amazon.com is growing 40% year over year, twice the rate of Amazon’s sales of merchandise it owns, he says.

Companies that sell through Amazon Business generally pay a 6% commission on every order processed through the B2B marketplace, with the commission on some products as high as 15%, Amazon says. That’s a steep commission, but the visibility of listing your products on the marketplace is priceless because it drives sales from customers otherwise unaware of your products, some sellers say. Others argue that placing your products on Amazon Business encourages buyers to compare products that may look the same, but vary in such key ways as price or intended use and risk cheapening their product.

There’s also the issue of Amazon collecting data on the customers of third-party marketplace sellers and the products sold. Who’s to say Amazon won’t gather information about what’s selling briskly and then start selling those items itself? Analysts and users are torn on the pros and cons of buying and selling on Amazon.com/Business.     

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N2Surplus Inc., a distributor of surplus products ranging from office supplies and eyeglass frames to industrial valves and materials for scientific laboratories, has sold on the B2B marketplace for about two years, says Neal Brenner, founder and president. In 2015, approximately 75% of its online sales were processed through Amazon Business, at Amazon.com/business, and other sections of Amazon.com as well as other other e-marketplaces. But when it comes to its sales on Amazon, the surplus dealer can’t tell the difference between the consumer-facing site and the business-facing bazaar. All of the orders placed through Amazon are labeled as processed through Amazon Business, even if they were placed on the B2C site, says Brenner.     

“I have no idea whatsoever of who orders my products from Amazon,” he says. “We’re a surplus business and it makes a difference to know who your customers are and how you should focus your business. If you don’t know the difference from a business sale or a regular Amazon sale it makes it difficult.”

Not distinguishing between business buyers and consumer shoppers makes it hard for Brenner to curate his product assortment to buyers on each marketplace. He also takes issue with Amazon witholding from sellers customer contact information after an order has been placed. This makes it hard to develop a relationship and remarket to individual customers, he says.

“One of my fears with Amazon Business is that they’re also getting the data related to the sales for my product,” he says. “That gives them the ability to source the product themselves. That’s my biggest fear. Whoever has the data has the advantage. ”

While selling on Amazon Business does have that downside for Brenner, he says the site helps N2Surplus by marketing his products to a broader base of buyers than would visit his own site. Orbital Tracking Corp., a manufacturer and distributor of satellite tracking devices, plans to start a storefront on Amazon Business in the second quarter of this year for the same reason. Orbital has been selling on the consumer-facing Amazon site for about a year, generating about 5% of its total revenue from Amazon, says David Phipps, CEO.

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The key to deciding whether to sell through Amazon Business, or through the retail-based sections of Amazon.com, is to first identify what a seller wants to accomplish in terms of expanding its exposure on a big marketplace—and what it’s willing to accept in not having good information on its marketplace customers, and in possibly giving Amazon vital information on hot-selling products.

One thing that might help sellers decide is expected improvements to how Amazon Business operates. Wingo says he expects Amazon Business to add additional features to its B2B marketplace this spring, including an expansion of its business categories to make it easier for third-party sellers to list products and process their orders. “I know from talking to business customers that they want more controls around special pricing (by SKU, buyer and volume), bundling and kitting, and more connections into back-end systems like ERP and purchasing/supply chain,” he says. “I expect innovations in those areas.” Companies use enterprise resource planning, or ERP systems, to organize their inventory and financial management.

That’s more food for thought for companies considering selling on the big marketplace.

Sign up for a free subscription to B2BecNews, a twice-weekly newsletter that covers technology and business trends in the growing B2B e-commerce industry. B2BecNews is published by Vertical Web— Media LLC, which also publishes the monthly business magazine Internet Retailer. Follow Nona Tepper, associate editor for B2B e-commerce, on Twitter @ntepper90.

 

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