Qasim Mohammad is a Toronto-based technology entrepreneur
Over the last decade, Amazon's marketplace has acted as the most notable catalyst for what is now touted as the retail apocalypse. The company's fresh approach to retail commerce – enabled by an emphasis on convenience, personalization and price – was just the first act, however. Amazon has recently set its eyes on making it easier for businesses to purchase products from one another. And this time, its weapon of choice is Amazon Business.
Launched in 2015, Amazon Business is a free-to-use business supplies marketplace. During its first year of operations in the United States, the venture signed-up more than 400,000 businesses and 45,000 sellers, and generated more than a billion dollars in revenue. It has since launched in countries such as Germany and Britain, and reached the million customer mark in July, 2017.
These numbers are significant and represent rapid growth for what could potentially be Amazon's "fourth pillar" – after Marketplace (where it sells items), Prime (its $99-a-year membership) and Amazon Web Services (its cloud computing business). Business-to-business (B2B) wholesale and distribution currently represents an $8-trillion market in the United States alone. Given the size of the opportunity, the potential impact of Amazon Business on the company as a whole cannot be overstated.
Amazon's interest in B2B wholesale and distribution stems from the inefficiencies that still exist within the space, despite the hyper-digital nature of commerce today. It can be very challenging for individuals to purchase products as employees of a particular organization. Before making a purchase, there are endless internal work flows for assessing needs, obtaining approvals and sourcing suppliers. Once a preferred supplier or distributor has been identified, negotiations can run long and fulfilment can be slow. These steps are codified in what are widely known as the "seven steps of procurement." Although formal procurement teams within organizations live by these steps and actively enforce them, other employees and departments can find them long, tedious, and distracting.
The inefficiencies in procuring B2B products and services have left employees asking why they don't have more control over the shopping experience, and whether there's a way for procurement departments to monitor spending compliance without compromising employee buying journeys. This question is being asked at a time when a vast majority of B2B suppliers acknowledge that their customers' expectations follow business-to-consumer (B2C) shopper practices. Unsurprisingly, purchasing agents representing businesses expect the same robust, rich, informative, responsive and personalized shopping experiences they're afforded through modern B2C e-commerce.
Amazon Business is purpose-built to address the concerns of B2B purchasing agents and professional procurement teams concurrently. Employees can take advantage of the full Amazon shopping experience with speed and personalization at its centre, while procurement teams can simultaneously deploy supply-chain and spend-management techniques that operate in the background – giving them the control, visibility and insights they desire.
Indeed, the last few decades saw the rise of procurement software vendors that enable forward-thinking businesses to provide employees with a compliant shopping experience through independently managed supplier catalogues. As these procure-to-pay (P2P) and spend-management platform providers have attempted to bring the modern B2C e-commerce experience to B2B procurement, they have also significantly increased the burden on purchasing departments and employees to manually keep these systems up to date. The software is typically expensive, hard to maintain, and implemented in fragments. And naturally, it is difficult and needlessly duplicative for any business to compete with Amazon's ability to consolidate the largest number of B2B suppliers into a single platform and provide a fast, vertically integrated shopping experience.
P2P and spend-management software vendors appreciate the growing threat from Amazon Business, hence the recent push to integrate with the platform to remove any duplicative efforts associated with implementing and maintaining their software. These integrations are meaningless, however, for smaller and less mature businesses with fewer resources to invest in a formal procurement function or associated software. Amazon Business allows these organizations to delay any such investments until their supply chains become vastly more complex.
Forrester Research predicts that B2B e-commerce will top $1-trillion by 2020 and account for about 12 per cent of all U.S. B2B sales by 2020. Amazon Business is poised to broker a large portion of these transactions given its early mover status in the space, aggressive targeting of huge verticals like government and health care, and by developing relationships with increasingly complex suppliers across industries. The types of products that can eventually be sold and procured through the platform are vast in scope.
Suffice it to say, there are certain aspects of B2B commerce that will always be relationship driven and present unique procurement challenges to buyers and sellers. This is particularly the case for specialized industries and departments that are responsible for purchasing highly complex products and services. Amazon Business and B2B e-commerce are not optimized for this use case. But for everything else, we're approaching an era of commerce where purchasing agents at organizations can get used to shopping experiences that mimic those they've become used to when buying for themselves personally – a welcome change in a world used to convenience.