For an organization that’s all the talk of the B2B ecommerce market, Amazon.com Inc. was surprisingly quiet on its year-end earnings call Thursday about Amazon Business, one of its fastest-growing units.
As with many of its other business units, Amazon doesn’t break out many specific metrics on Amazon Business in its corporate financial reports. It did note in a blog post in September 2018 that Amazon Business had surpassed $10 billion in annualized sales, including sales by third-party sellers. The B2B marketplace serves 55 Fortune 100 companies, more than 50 of the largest 100 hospitals, 40 of the local governments serving the 100 biggest populations, and 80% of the 100 largest educational institutions.
Wall Street analysts also dig into Amazon Business financial data. Mark Mahaney, a prominent ecommerce analyst with RBC Capital Markets, says Amazon Business was on track in 2019 to increase its gross sales by 60% to $16.0 billion, up from $10.0 billion in 2018. Net revenue for Amazon Business increased 67% from an estimated $10 billion in 2019 from $6.0 billion in 2018, says RBC.
Growing faster than Amazon Web Services
To put that into perspective, Amazon Business’s gross sales grew 2.9 times faster than total sales for Amazon, which totaled $280.52 billion across all business segments during 2019, up 20.5% from $232.89 billion the prior year.
With its gross sales, Amazon Business also grew 1.6 times faster last year than Amazon Web Services, its cloud computing and network services arm. Last year Amazon Web Services increased sales 37% to $35.02 billion from $25.66 billion.
Overall, Amazon Business accounted for 5.7% of all Amazon revenue in 2019, compared with 4.4 % in 2018.
But for such a fast-growing unit, Amazon Business was a surprising no-show in Amazon’s year-end earnings comments. There was no mention of Amazon Business or B2B marketplaces on its year-end earnings call with analysts.
The expanding global reach of Amazon Business
In its full-year 2019 earnings release, Amazon did tout the increasingly global reach of Amazon Business—and the introduction in some markets of Amazon Business Prime, a subscription fulfillment and delivery program that lets users pay for such perks as one-day shipping, a designated delivery day and flexible payment options among others.
“Amazon Business launched in Canada and now serves commercial and public sector organizations of all sizes in Canada and eight other countries, including the U.S., U.K., Germany, France, Italy, Spain, Japan, and India,” Amazon says. “Amazon Business also launched Business Prime in Canada. Business Prime offers member-only benefits to help save time and money, in addition to unlimited fast, free shipping on eligible items for every member on the account.”
Amazon didn’t immediately say why the biggest online retailer was so quiet on its year-end earnings about Amazon Business, which analysts such as Mahaney says is a big market influencer and growth driver in B2B ecommerce.
“Amazon Business has grown at a 115% 3-year compound annual growth rate (CAGR) from 2015 and 2018, and the company faces a very large, underpenetrated, fragmented and inefficient market,” Mahaney says. “Amazon has the technology platform, logistics prowess, selection, and a large network of sellers and buyers that we believe will enable the company to grow its business segment faster than the overall retail segment for the foreseeable future.”
Flying under the radar
Amazon may have kept mostly mum on its fast-growing B2B ecommerce unit in its year-end comments because Amazon is still trying to figure out the complicated, multiple-industry and fragmented B2B digital commerce market, says Jeff McRitchie, vice president of marketing at MyBinding.com and a veteran third-party seller on Amazon business.
“There could be big talk internally about Amazon Business, but in the B2B market they still may see themselves as flying under the radar,” McRitchie says. “For many B2B sellers, there may be a fear factor about them and they are still trying to build market share, attract buyers and sellers, and not rock the boat.”
As a veteran Amazon seller, MyBinding.com knows how to effectively sell on the Amazon marketplace, such as choosing carefully among the selling services Amazon Business provides, McRitchie says.
Third-party sellers ‘excited but wary’ about Amazon
But Amazon is still trying to figure out the B2B ecommerce market, including how to sell more complex products in different industries and maybe be approaching it will do that very quietly, he says.
“A lot of businesses are both really excited and wary about selling on Amazon Business, McRitchie says “They want to be close because of the opportunity—but not too close.”
Amazon, which also conducts B2B sales in the Automotive & Industrial section of Amazon.com outside of Amazon Business, has plenty of room to grow in the B2B market, industry analysts say. Colin Sebastian, a financial analyst at R.W. Baird & Co., has estimated that Amazon’s total B2B sales will exceed $25 billion by 2021 and could eventually surpass its retail sales.
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