The Unsexy Business That Amazon Wants to Conquer Next But Probably Can't
Amazon is a behemoth but Amazon Business is unlikely to ever dominate business-to-business commerce.
We've seen it time and time again: Amazon shatters Prime Day record, Amazon makes major acquisition, Amazon soars while retailers slump. There is no question that Amazon is dominating online retail as the mainstays of the industry are shutting their brick-and-mortars and attempting to stay afloat with ecommerce. However, there's a less talked about aspect to Amazon's growth that's quietly gaining traction -- Amazon Business, the company's B2B marketplace.
In July, Amazon Business announced that it has more than one million business customers since launching in April 2015 and according to Reuters, the marketplace surpassed $1 billion in sales after its first year of sales. Despite these successes, there's a debate about whether Amazon can truly disrupt the B2B ecommerce space -- which Forrester estimates to hit $1.1 trillion by 2019 -- like it has the rest of the B2C retail industry.
My take? Yes -- Amazon will dominate certain aspects of B2B ecommerce, but the company will never truly own the space. It wouldn't want to.
The Complex B2B Landscape
There's a common misconception that B2B ecommerce is simply an enhanced B2C model, aimed to meet the rising demand for an "Amazon-like" customer experience. But, it's important to understand that the B2B ecommerce landscape could not be more different than B2C -- it often has complex, individualized product and service configurations, pricing and quote processes, cross-ocean delivery, and regulations...just to name a few challenges. B2B requires a focus on customer experience, but it's an entirely different playing field.
A few examples: B2B sales typically have multiple pricing tiers for the same product, depending on the customer, product group and order bundling. Therefore, incorporating pricing into the ecommerce experience can be challenging. The number of stakeholders involved in the buying decision also makes it difficult to provide a consistent experience -- in fact, a CEB survey revealed that 5.4 people, on average, are involved.
Lastly, most B2B transactions rely heavily on sales representatives in the field to close major deals and build personal customer relationships. Ecommerce can help enhance these experiences, but the human element will always need to be present -- chatbots will not cut it.
Where Amazon will lead
Amazon tends to go after bigger opportunities. For that reason, the company is not going to try to compete with highly differentiated, highly secure and highly complex B2B products (think: jet engines, nuclear power plant parts, advanced commercial heating systems, etc.). These products, as mentioned above, have a complicated, long-lead sales process and intricate level of customer service required, which is not easy to replicate. Instead, Amazon's focus for B2B will remain on commodity-based products such as commercial restaurant equipment, office supplies, medical devices, construction equipment and packaging.
For commodity-based sellers, the entrance of Amazon into the space could mean opportunity and it could mean disaster. Truth be told, companies specializing in these products will need to sell on Amazon to survive. They will be forced to embrace the Amazon Business platform. That's not to say, however, they should put all their eggs in one basket.
These companies should simultaneously develop digital commerce channels, including their own ecommerce platform, that are separate from Amazon so they can stay strong on their own. Selling on Amazon should go in tandem with an omnichannel approach -- having a physical location, effective sales force and strong digital presence.
With its quick and early successes, Amazon will undoubtedly grow to dominate certain aspects of the B2B space. As the company learns more about the intricacies of B2B over time, it will be interesting to see just how much of a stronghold it develops on the industry. The future might call for a B2B equivalent to the company buying Whole Foods, for example, an acquisition of The Home Depot or a leading plumbing distributor. Only time will tell, but in the meantime, there are steps other B2B players can take to lessen the impact.