A big frustration for procurement agents seeking to buy online is that often they have to create an account or sign in to an existing account to see prices on B2B e-commerce sites. But that’s not the case on Amazon.com, where product prices are always visible.
What’s more, while suppliers selling on the Amazon Business marketplace can set negotiated prices with customers, those customers don’t just see the negotiated price of an item—they also see what other Amazon sellers are charging for that product. And if the marketplace price is lower than the negotiated price? “The customer gets the choice,” including to buy at the lower marketplace price, Prentis Wilson, vice president of the Amazon Business, the business-to-business online marketplace operated by Amazon.com Inc., said today during the B2B E-commerce workshop at IRCE 2016 in Chicago. “It’s all about building trust for the customer,” Wilson said. “Frankly, the customer will find it anyway.”
Wilson, who was interviewed today by Forrester Research B2B e-commerce analyst Andy Hoar, made a pitch for more companies to sell on Amazon, while also explaining how the B2B section of Amazon.com works.
“We treat sellers as customers,” Wilson said. “This marketplace was built to support sellers trying to reach more business customers.”
He said Amazon Business has built services aimed at facilitating B2B sales. That includes connections to so-called “punch-out” systems within businesses’ procurement systems that let buyers seeking a product connect directly to approved sellers. Wilson said many business buyers like connecting to Amazon Business because a single connection gives them access to the thousands of companies that have signed up to sell on the marketplace in the year since the former Amazon Supply was renamed and relaunched as Amazon Business. Some 300,000 companies have created Amazon Business accounts, including buyers and sellers. Amazon reported last month that Amazon Business exceeded $1 billion in sales in the first year since its relaunch.
He also noted that Amazon Business sellers, just like retailers selling to consumers on Amazon.com, can store inventory in Amazon’s more than 100 U.S. warehouses and let Amazon handle order fulfillment, a service called Fulfillment by Amazon.
A big advantage of FBA is that members of Amazon’s popular Prime loyalty program can get free, two-day shipping on merchandise fulfilled via FBA, and that Prime badge on a product has been shown to increase the likelihood a shopper—whether consumer or business buyer—will buy. Wilson said over 99% of the Amazon Business suppliers who use FBA have made a sale on the Amazon B2B marketplace in the past year.
Wilson said a significant amount of Amazon Business’s sales fall into the category of “tail spend,” items that a company or government agency might not buy often enough to include on the list or products it negotiates prices for with suppliers. He said it makes sense buyers would turn to Amazon Business for such unexpected or infrequent purchases.
“There are hundreds of millions of products in one location and a broad number of sellers in one spot,” he said. “They save a lot of time by not having to search all over the place. They get the user experience they like and access to a broad set of sellers.”
In addition, he said, if a business buyer purchases several items they will all arrive together, and there is only one company to call, Amazon, to check on the status of an order.
Wilson noted that all the products available on the Amazon.com marketplace are available on the Amazon Business section of the website. While Amazon does not reveal how many SKUs it sells some analysts estimate the product selection at 350 million items, and all those items show up on Amazon Business.
Suppliers can also make certain products available only to business buyers. That may be because the products are only intended for businesses, the suppliers don’t want to sell directly to consumers or because the supplier is legally required to sell only to authorized buyers, Wilson said.
If there is a surprise in the first year since Amazon Business launched under its new name, Wilson said, it’s the number of large business and government agencies who are buying on the B2B marketplace. “When we launched we thought this would be super interesting for small businesses,” he said. “But one of the things interesting to us is the number of large enterprises coming to Amazon Business interested in creating accounts for their employee base.” He noted that Amazon does have a saleforce that can help such large organizations set up accounts, including with authorization workflows and approved product lists.
Before he interviewed Wilson, Forrester’s Hoar provided some “unofficial” projections about the potential growth in U.S. B2B e-commerce in the years ahead. He said that while Forrester analysts foresee business-to-consumer e-commerce plateauing at about 14-15% of retail sales, there doesn’t seem to be a similar hard ceiling for B2B e-commerce. In part, he said, that’s because consumers want to be able to see merchandise and trying on apparel, but that there is often no comparable barrier to business buyers making purchases online.
As a result, he said, though he emphasized this was not a formal Forrester forecast, it would not surprise him if B2B e-commerce could reach 40% of all B2B transactions in the United States by 2030. That would be roughly $6 trillion of a projected $15 trillion in U.S. commerce between businesses in 2030, Hoar said. Forrester’s official estimate is that online retail sales in the U.S. will reach $531billion by 2020 when B2B e-commerce sales willl total $1.13 trillion.
That estimate of e-commerce, he added, does not include purchases placed through electronic data interchange, or EDI, a widely used method of exchanging purchase orders, invoices, shipping confirmations and other documents between companies.
Hoar noted therre is an “Amazon effect” at work in B2B e-commerce as companies that sell to other businesses increasingly compare their e-commerce sites to Amazon—and find them wanting. In a late 2015 Forrester survey of B2B sellers only 18% said the experience they offer on their website is worse than that of competitors, but 63% said it was worse than the Amazon experience. He said the prior year the percentage admitting they were behind Amazon was in the 50%-plus range and a year earlier in the range of 40%. He predicted that those recognizing they trailed Amazon would increase in the years ahead.
And that’s leading them to seek to emulate Amazon as the leading Internet retailer, which is ranked No. 1 in the Internet Retailer Top 500 Guide. Increasingly, Hoar said, when B2B companies seek bids on an improved e-commerce site “they say their goal is to produce an Amazon-like customer experience.”
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