Amazon.com Goes Beyond AmazonSupply – Open for Amazon Business Pierre Mitchell and Jason Busch - April 28, 2015 6:58 AM | Categories: Analysis, Breaking News, eProcurement / Procurement, Industry News, Solution Providers | Tags: Breaking News, General News, L2 Earlier today, Amazon announced its Amazon Business Marketplace – a highly material expansion of its original business, AmazonSupply, targeting the B2B community and combining in some additional features that we’ll discuss momentarily. Amazonsupply.com was originally launched in 2012, offering 500,000 specific SKUs targeting both the laboratory/science and industrial communities. It eventually grew to over 2 million SKUs, all managed and stocked by Amazon. Amazon told Spend Matters that its AmazonSupply business, combined with business spend on Amazon.com, serves “millions of business customers” who spend “billions of dollars annually on business-related purchases,” representing more than 100 times the selection of AmazonSupply alone. RELATED: Read our competitive deep-dive assessment on Amazon Business pricing, selection and experience. A New B2B Chapter For Procurement and Buyers Amazon’s announcement today of Amazonbusiness.com marks a new chapter for Amazon overall in the B2B sector. Think of it as a combination of the original AmazonSupply.com site (which itself was a combination of content from its SmallParts.com acquisition made in 2005 and “cloned” functionality from the Amazon.com site made back around 2012 when we first covered it), but with a new set of business-centric capabilities designed to appeal to both business and procurement users. Amazon is also aggressively working to move customers off the old AmazonSupply site to the new site in order to have a single platform by the middle of May. Most important, Amazon Business differs from AmazonSupply in a number of ways: It offers basic e-procurement capability in the form of approval workflow and PO tracking to help business users manage and review purchases.For larger buyers that have their own e-procurement functionality, they can “punch-out” to Amazon, shop freely (which has its downsides, too) and then return the shopping cart details to the e-procurement system for approvals before releasing the approved order to Amazon for fulfillment.For more on this topic in all sorts of gory detail, see here. More than 2 million sellers are represented, especially since the marketplace features “Fulfillment by Amazon” (i.e., it sells selling goods beyond what Amazon has taken title to in its own warehouses – even though it may store the merchants goods in the warehouse for a fee, which brings additional value to sellers in terms of shipment offers they can make to customers). The site/solution offers a “live expert” customer support capability that basically creates a conduit between the customer and the manufacturer of the item. Amazon could never really offer this capability on its own – so this is a smart move. However, manufacturers need to go in eyes wide open with this feature, as we’ll discuss in our forthcoming PRO analysis. Industry-specific shopping – Amazon offers vertical personalization (in addition to true user personalization features derived from the core Amazon platform that consumers are familiar with) for Amazon Business based on a number of categories for items typically purchased in certain verticals including: construction, manufacturing, laboratory and healthcare, education, food services, professional services and a catch-all “general business category.” Free 2-day shipping on orders above $49 is also offered. Specific to the B2B area, Amazon is including basic purchasing management capability, enabling you to create accounts with multiple users (and user groups that can be implemented to support roles and related abilities) and features to create basic approval workflows with Amazon Business. The solution also takes advantage of other Amazon capabilities including personalization (e.g., previously ordered items is the most basic example), highly-specific SKU and attribute data (including manufacturer-level information), messaging and order tracking. Amazon Business is free for all companies including small businesses (like our firm). Azul Partners (the parent company of Spend Matters) trialed some of the workflow and PO capability within Amazon Business in recent months during a beta period and did not encounter any issues throughout this time. The Supplier View From a supplier perspective, Amazon has added a number of new features to Amazon Business including the ability to list business-only offers and to provide specific “business-only” pricing at the SKU level (with quantity discounts/price breaks) that was not possible before with the old bulk pricing functionality. Other supplier features include tax exempt purchasing and the ability for suppliers to showcase specific credentials in the Amazon marketplaces (e.g., supplier diversity certifications, ISO certificates, additional quality or industry certification, etc.). There are some definite caveats to these features, though, as we’ll explore in our PRO analysis. Most fundamentally, however, Amazon casts itself as an e-commerce platform to suppliers, but that’s misleading because it’s really only a platform that enables the suppliers to connect into the Amazon channel rather than to any distribution network and end customer. It is a sell-side on-ramp beholden to the marketplace in an even “stickier” manner than Ariba e-procurement is a buy-side on-ramp to the Ariba Network (marketplace). Observations and Initial Analysis Spend Matters will be providing additional analysis and commentary on Amazon Business on Spend Matters PRO later today. Our initial observations suggest: Amazon Business is much more substantive than AmazonSupply in terms of spend category breadth (e.g., adding categories such as electronics/computers, software, deeper office supplies coverage, etc., for a total of 45 categories!). This is a truly serious game-changing offering that is not about dabbling in the B2B waters, but about changing the e-procurement, industrial distribution and broader e-commerce. The move is only the first volley we will see as the e-commerce giant gets serious about the business market – we expect significantly more capability taking advantage both of specific feature build-out (e.g., more robust e-procurement capabilities, which doesn’t necessarily mean it offering a native e-procurement application) as well as additional integration and other services based on Amazon’s overall service-oriented architecture (SOA) and platform-as-a-service (PaaS) models. See related coverage for more information on this. The potential downstream activities that Amazon can involve itself in from a B2B standpoint are potentially game changing and include broader trade financing capability for both buyers and sellers. Amazon offers a line of credit and also has a credit card partnership with Chase, but there is a B2B opportunity here that is a no brainer that is not being offered yet which we’ll discuss in our PRO article. Large procurement organizations are excited to explore alternatives to traditional industrial distribution models and will welcome competition in MRO (e.g., Grainger) to IT (e.g., Dell, CDW) to office products (e.g., Staples), but Amazon Business still is only a piece of the total puzzle if it doesn’t address requirements for tool cribs, vending machines, spares/inventory integration and other value-added services in industrial supply.We’d say don’t hold your breath on this being offered natively or even through partners in the short-to-medium Amazon’s pricing model will likely force a reevaluation of corporate pricing agreements and models across procurement teams. After all, if it’s “cheaper on Amazon Business” and the negotiated agreement is more for the same SKU, especially since the supplier pricing has to somehow accommodate the 8% to 12% (roughly) fees that Amazon charges the suppliers, then procurement will have some serious explaining to do. While Amazon Business is now open for business, we suspect that it will take time for the provider to scale the offering and learn from users. There definitely are improvement areas to address regarding controls, personalization, tech apps integration, supplier discovery, mobile, pricing, payments, trade financing, partner integration, third-party services, data privacy/confidentiality and other areas. Still, in buy-side-enabled B2B e-commerce, even though Amazon is “only” an e-marketplace – and one biased toward Western markets – its infrastructure as a service (IaaS) and PaaS technology stack is now in the drivers seat over other titans like Google, Microsoft, Apple (Apple Pay notwithstanding), and even to some extent IBM and Oracle. Yes, Alibaba is a player here, but it’s as much a non-player in the US as Amazon is a non-player in China. The real players with an ecosystem are Salesforce.com and SAP. The former is the real “force” (pun intended) and SAP is a diamond in the rough if it can get its strategy right here – which hasn’t been the case so far as we’ve written about extensively. Amazon still has a long way to go, and there are some definite issues that larger buyers (and sellers) pay attention to before they jump on the Amazon bandwagon (which we’ll address in our forthcoming PRO article), but like Jeff Bezos likes to say, “It’s only day one.” After all, Amazon.com did not transition from selling books to everything under the SKU sun in one night. Yet with a single switch and announcement today, Amazon Business is now live to tens (if not hundreds) of millions of companies, from one-person independent contractors and freelancers to the largest Fortune 500 firms. The solution is certainly geared toward smaller firms – at least today – but this is where the 95% of firms are, so it’s a good place to start.. But the big question is: What’s next? There’s no going back. And that’s a good thing. Related ArticlesThe Wonders of Amazon and The Extended Supply ChainAmazon vs. SAP/Ariba and the Coming BattlegroundAmazon.com vs. Ariba: The B2B Merchant Experience to Procurement is in for a Storm of ChangeAmazonSupply: The Supplier/Merchant Experience Shows Why Grainger Should be WorriedAmazon vs. Ariba, Oracle’s Value Chain Summit, ADP, and CatManAmazon vs. Ariba: The Coming Battleground?Amazon: A Supply Chain Look Beyond the NumbersAmazon Supply: Changing the Face of MRO?The AmazonSupply Customer Experience: First Fulfillment Impressions with MRO and MetalsAmazonSupply: Competitive Implications (Quick Take -- Part 2)AmazonSupply: Competitive Implications (Quick Take -- Part 1) Voices (3) Jason Busch: 19.11.2015 at 1:32 am The problem is that the CEO of this company is too libertarian to actually file as a woman owned business — or too busy … 🙂 Reply Pierre Mitchell: 18.11.2015 at 9:41 pm Leonard, I’m sure Amazon Business will eventually have a robust capability for tagging FBA suppliers on its site – if they’re even on their site and if you want to use that channel. You could also some various supplier networks to strategically source some diverse suppliers in specific spend categories where you have the greatest spend and transactions. You can also use certain mega category suppliers like Staples, Grainger, etc. to identify diverse suppliers. There are also ways to segment your spend/requirements to balance diversity goals with others. Anyway, drop me a line and I’m happy to chat. And, btw, we’re woman owned AND we’re the best value around. Objectively speaking of course. 😉 Reply Leonard Gold: 18.11.2015 at 11:35 am My company will not use Amazon because they prefer to use women owned companies – “Diversity” even when Amazon is way more price competitive. Is there anything published which I could use to overcome this? Reply Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of follow-up comments by email. Notify me of new posts by email.