Amazon Business: Amazon’s magic beanstalk

Amazon.com (AMZN) has a proverbial magic beanstalk in its business-to-business platform Amazon Business, which has reportedly hit over $10 billion in annualized sales.

Amazon Business, which was launched three years ago to cater to corporate customers and facilitate the easy purchase of business supplies, hit $1 billion in sales in the US during its first year, prompting parent Amazon to expand overseas.

In 2016, Amazon Business was put in motion in Germany, followed by expansions into the UK, Japan and India in 2017. This year, the business moved into France, Italy and Spain and is now present in a total of eight countries.

Amazon currently serves millions of customers through Amazon Business and provides all kinds of supplies from lab and factory equipment to office products, indicating a significant expansion of its customer base over the past three years.

In the US, Amazon Business serves a majority of educational institutions, Fortune 100 companies and hospital systems. Third-party sellers comprise over 50% of the $10 billion in worldwide sales. Amazon continues to make meaningful investments in logistics and has improved the business by bringing out updates like Business Prime Shipping.

Amazon Business has seen a significant expansion in its customer base over the past three years

The platform represents a huge growth opportunity for the company and has come very close to existing industry leaders while also turning into a formidable opponent for other sellers in this space. The biggest industrial supplier in the US is WWW Grainger (GWW) which reported annual sales of $10.4 billion in 2017.

While Grainger is projected to report a slightly higher number in sales for this year, it is evident that Amazon has come very close to this industry leader. For its most recent quarter, Grainger reported revenue and profit increases which surpassed expectations and the company raised its outlook for the full year based on its performance.

Despite the positive momentum, the competition from Amazon is very real for companies like Grainger. Grainger is taking various steps like cutting costs to optimize its business and these measures appear to be paying off. The stock is up over 52% so far this year.

Another player in this space is Fastenal Company (FAST), which reported $4.3 billion in sales for 2017. Fastenal has consistently reported sales growth for around 10 years and this trend continued into its most recent quarter which saw a sales growth of 13%. Although it is on a positive trajectory, the company has a seasoned rival in Amazon. The stock is up 8% thus far this year.

According to data from Forrester Research and Bloomberg, the business-to-business market is projected to reach $9.3 trillion by 2020 in the US and 12% of this will be online. Based on the recent information from Amazon, the company is well on its way to capturing a sizeable portion of this market which offers significant growth opportunities.