Amazon Business hit $25 billion annual sales in 2020, just 5 years after its inception. To put things into perspective, it took Amazon’s B2C marketplace twice as long to hit the $25 billion milestone, although Amazon B2B certainly has the advantage of building off Amazon’s existing brand and infrastructure. This incredible growth isn’t enjoyed by only Amazon either: More than half of these sales came from third-party sellers.
Suffice it to say that Amazon Business is considered very high potential right now, with lower competition than Amazon’s B2C marketplace. Given this opportunity, it’s starting to draw more attention.
Amazon Business is Amazon’s marketplace intended for business-to-business transactions, as opposed to business-to-consumer transactions. Businesses tend to buy in much larger quantities than individual consumers, so the separate marketplace provides a platform for those types of transactions. Listings on marketplace can offer bulk quantities, tiered discounts, flexible payment terms, and other perks not seen on the B2C marketplace.
Amazon Business was founded in 2015, 20 years after Amazon’s inception, and its rise to success has been nothing short of meteoric:
In a blog post, Amazon wrote that Amazon Business now serves nine countries, 45 U.S. states, and 80 of the Fortune 100 companies. Baird Equity Research predicts it will surpass $80 billion in annual sales by 2025, just 10 years after its founding.
If you haven’t heard much about Amazon Business before 2021, you’re not alone. Amazon Business has garnered far less media attention than Amazon’s B2C marketplace, in part because Amazon itself has historically put less emphasis on promoting B2B.
That seems to be changing, however. In March 2021, Amazon hosted a free virtual event all about Amazon B2B called re:Shape. The event featured speakers from Uber, Citi, Him & Hers, and other major brands. Representatives from schools and hospitals also spoke, sharing how they leverage Amazon B2B to supply their needs. The event focused heavily on the logistical benefits of B2B, citing examples of bulk orders for school supplies that could be syndicated to students as schools adapted to virtual classrooms due to COVID-19 and hospitals receiving much needed medical supplies.
Amazon built their empire by making the customer experience as seamless as possible, and that holds true with Amazon Business. To create an Amazon account for B2B selling, simply create a Seller Central account.
Whenever Amazon sellers create their account or add new products, those products are automatically added to both the consumer and the business marketplace. Where things get a little more complex is in supply chain management, including warehousing and fulfillment.
Amazon FBA is often seen as the gold standard for fulfillment, and not without reason. Amazon FBA set the standard for 2-day shipping, and now 1-day shipping and same-day shipping are becoming increasingly available. From an end-consumer’s perspective, FBA is pretty grand.
However, from a seller’s perspective, FBA can sometimes be constraining. When it works, it works great. But Amazon has also earned a reputation for making unilateral decisions that significantly impact sellers on its platform without offering alternatives. This was painfully obvious at the onset of the COVID-19 pandemic in the U.S., when Amazon restricted inbound shipments.
Amazon FBA also doesn’t permit certain products or charges higher fees, including hazmat, meltables (during certain times of year), and oversized products. Some of these prohibited products are the same type of products that businesses might buy in bulk.
Perhaps more importantly, FBA charges long-term storage fees and has quantity restrictions, so storing sufficient inventory at Amazon for large volume business orders isn’t always possible or financially sound.
That’s where dropship comes into play. Dropshipping is the practice of listing a product online without storing inventory at a fulfillment center. When an order is placed, the seller passes the order back to the manufacturer’s warehouse, which then ships the product directly to the customer. In this way, dropship products skip the middleman. There are some serious pros and cons to dropshipping, but that deserves its own blog post.
Given the storage fees, quantity limits, and product restrictions at FBA, dropship makes a ton of sense for Amazon Business. As just one of many examples, in late 2020, Kaspien fulfilled a large Amazon Business order worth over $120,000 through dropship! Such an order would not have been nearly as viable on the consumer marketplace or with FBA.
Conveniently enough, Amazon published a comprehensive blog post reviewing how Amazon Business works and some of the key benefits. According to Amazon, the top five benefits of Amazon Business are:
The last notable piece of Amazon’s B2B marketplace is Amazon Business Prime, which is a separate membership from Amazon Prime. Business Prime comes with its own set of perks, according to Amazon: “Business Prime offers unlimited, FREE shipping on eligible orders and more business purchasing benefits, like Spend Visibility, which lets you create custom visual dashboards powered by AWS cloud computing technology.”
Business Prime members also gain access to Guided Buying, which helps direct a company’s purchasing team to the products and sellers that comply with their purchasing goals, as well as the ability to get extended terms for Pay by Invoice.
Amazon Business is but one of many exciting growth opportunities coming into the spotlight. Fortunately, we discuss many of those opportunities in our blog, whitepapers, eBooks, podcasts, and more. Subscribe to our weekly blog to never miss a beat!