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Amazon’s business-to-business (B2B) e-commerce marketplace, Amazon Business, is estimated to bring in $52 billion in sales and $31 billion in revenue in 2023, according to RBC Capital Markets as cited by CNBC.
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This would represent a steep increase for the segment, which offers a marketplace for firms along with other business-focused products and tools, considering Amazon Business recorded over $10 billion in annualized sales as of September 2018.
The B2B industry offers a tremendous opportunity that’s far bigger than business-to-consumer (B2C) retail, potentially enabling Amazon Business to thrive. B2B e-commerce was estimated to reach over $1 trillion in the US in 2018, while US retail e-commerce sales only amounted to $524 billion last year.
And with B2B sales estimated to be worth $7.37 trillion in the US in 2018, there’s a large opportunity for Amazon Business to pick up more sales as the market shifts more toward e-commerce, which could set it up to meet RBC’s projections.
There are several reasons why Amazon Business might succeed in the B2B e-commerce market in the near future:
- Amazon Business is estimated to already be growing faster than other key Amazon segments. RBC analyst Mark Mahaney estimated that Amazon Business’ compound annual growth rate (CAGR) over three years is 115%, which is far faster than Amazon’s retail business’ performance of 28% and Amazon Web Services’ 48% improvement over the same period, per CNBC. This suggests that Amazon Business has significant potential — and given the size of the B2B e-commerce opportunity, it’s possible it’ll be able to grow even faster.
- Amazon’s made a number of enhancements to its B2B offering that may make it more attractive to firms. It has added perks to its Business Prime subscription, which has tiers that cost from $179 to $10,099 a year, like faster shipping and extended payment terms. It’s also piloting a new smart shelf that makes replenishment orders for businesses when they’re running low on specific products. As the e-tailer introduces more offerings and technological innovations for businesses, its platform may be able to bring in more firms.
Amazon Business may be key to Amazon’s future retail growth since it already dominates B2C e-commerce and may have trouble growing its share much further. Amazon is the US’ leading e-tailer and attracts consumers both for purchases and product discovery, giving it a strong hold on the entire purchase funnel.
Because Amazon already holds the top spot and is facing increased e-commerce competition from players like Target and Walmart, Amazon’s B2C business may not be able to accelerate its growth as much as it once was considering that its retail business’ sales growth had slowed up until recent quarters. Meanwhile, B2B e-commerce offers a potentially larger sales opportunity that Amazon is just starting to tap into, so it’s possible that Amazon Business will be the e-commerce titan’s most important segment in the years ahead.
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