Amazon Business is the latest example of the Seattle-based company tapping into new revenue sources, which has helped it maintain a double-digit growth rate even as annual sales are projected to top $200 billion this year.
Schools, hospitals and governments have quickly embraced Amazon.com Inc. as a go-to source for supplies, propelling the company’s three-year-old business platform into a $10 billion annual enterprise. Its success may soon provide as much revenue as the Amazon Web Services cloud-computing division and its digital-advertising services.
The e-commerce giant likely will keep expanding the business service internationally — currently in eight countries — in response to demand from customers, said Prentis Wilson, an Amazon vice president who oversees the division. “We have a significant number of customers that use us in four or five countries,” Wilson said Tuesday in an interview, adding there are requests to expand the service to more countries.
Amazon Business is the latest example of the Seattle-based company tapping into new revenue sources, which has helped it maintain a double-digit growth rate even as annual sales are projected to top $200 billion this year. The program uses Amazon’s existing warehouse and delivery network built for its retail customers. And it follows the retail model of offering one-site shopping for hundreds of millions of goods, with computer keyboards, janitorial supplies, office supplies and break-room snacks among the top categories.
Sales volume for Amazon Business will exceed $25 billion by 2021, according to analysts at Robert W. Baird & Co. Inc. The business now operates in the U.S., Germany, U.K., Japan, France, Italy, Spain and India. Amazon’s consumer retail business operates in those countries plus Australia, Brazil, Mexico and the Netherlands, highlighting potential places for further expansion. “It makes a lot of sense for us to leverage existing assets,” Wilson said.
Amazon’s program challenges Staples Inc., Costco Wholesale Corp., WW Grainger Inc. as well as smaller specialty distributors. Businesses are shifting their supply-shopping online from less efficient methods such as browsing print catalogs, faxing orders and telephoning sales representatives. By 2020, 12.1 percent of $9.39 trillion in business-to-business spending will be online, according to Forrester Research Inc. Amazon’s shares gained 1.4 percent to $1,963 at 1:30 p.m. in New York, and had increased 68 percent this year through Monday’s close.
The internet giant launched Amazon Business in the U.S. in 2015 and reached $1 billion in sales a year later. In the U.S., customers include large schools, hospitals, more than half of the Fortune 100 companies and local governments, Amazon said. More than half of the products sold through Amazon Business come from hundreds of thousands of independent merchants who pay Amazon a commission on each sale, the company said Tuesday in a blog post, also modeled after its retail business.