Amazon Business – Launches in UK After Success In US & Germany

Yesterday, Amazon announced the launch of Amazon Business in the UK, targeted at all sizes of organisations, and just four months after Germany was launched as the first European venture for the initiative. The business is well established already in the US of course, and the firm says that 50,000 firms have already used Amazon Business as buyers and 10,000 as sellers in Germany. Incredibly, the marketplace will sell more than 100 million products.

The basic proposition will come as no surprise to users of the consumer Amazon website – an amazingly broad and deep catalogue, simple ordering processes and clever analytics sitting behind that interface to make the site and the service easy to use, helpful and tempting for the buyer. But there is an impressive range of other business-focused services and capabilities that form part of the new B2B proposition. These include free one-day delivery on orders over £30, VAT-exclusive pricing and in-depth analytics that supports tracking of spending by individual or corporate account.

There is no doubt that this will be a very tempting option for managing what we tend to call “tail spend” in our organisations; the 80% of smaller items or categories purchased that make up 20% (or often even less in our experience) of the total third-party spend picture. However, much of that tail spend is based around services rather than products, and Amazon is less likely to have an impact in those service categories – for the moment at least.

But equally, we could see the offering having an impact above and beyond the tail. Even what might be substantial spend areas for some organisations – IT hardware and software, furniture, tools, lab equipment and supplies, office supplies and so on – might well come into play here. The potential for organisations to obtain such items via Amazon, given the likely combination of keen pricing and what we might call market-leading supply parameters (speed of delivery, ease of ordering etc.) may well be tempting.

This represents both an opportunity and a challenge for procurement professionals. At worst, ineffective procurement departments might find themselves partly or largely replaced by Amazon, and without controls, some organisations might see total spend increasing rather than decreasing because of the ease of doing business.

At best, using Amazon in a structured and considered manner can be good for the organisation and a positive element in the wider overall procurement strategy. And even here, procurement will still need to think about issues of specification, restricting user choice where appropriate, budgets, how spend data from Amazon is incorporated into wider analytics and data tools and so on. (Although that last point may be covered in some cases by Amazon’s comment that the platform will be “Enabled on leading e-procurement platforms including Coupa, JAGGAER and SAP Ariba”.)

In competitive terms, this move is of course bad news for many existing firms in UK supply markets that will be up against Amazon as a direct competitor. There may be opportunities to sell as a merchant via Amazon of course, but this can only lead to the giant firm becoming even more powerful.

So much to consider - and we will be back with more on the development shortly.

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