Amazon forges ahead in the B2B space

Amazon forges ahead in the B2B space

May 30, 2016

Amazon is pushing deeper into business-to-business e-commerce, which one analyst estimates could add $18-billion in company revenue by 2020.

The B2B unit, Amazon Business, began as Amazon Supply in 2012. The initiative was rebranded in April 2015 and Amazon — which posted 2015 revenue of $107-billion — recently indicated it reached more than $1-billion in annual sales, with 300 000 customers.

Bank of America Merrill Lynch analyst Justin Post estimates Amazon Business will reach gross merchandise volume of $3,5-billion this year, resulting in revenue of $3-billion.

He anticipates GMV of $8-billion next year and revenue of $6,4-billion. By 2020, estimates Post, Amazon will hit GMV of $25-billion and $18,6-billion in revenue.

“Based on recent management comments, Amazon Business appears to be ready for prime time, and we wouldn’t be surprised if Amazon invests in marketing to raise awareness as Amazon’s procurement systems improve,” said Post in a research note.

According to market research firm Frost & Sullivan, the US B2B market is expected to reach $1-trillion in sales by 2020, and $6,7-trillion globally.

“We think B2B provides significant runway for growth, which could help Amazon sustain its growth rates and premium valuation for many years,” wrote Post.

He has a buy rating on Amazon stock, and a price target of 840.

Amazon stock ended trading up more than 1%, to 704.20, in the stock market today, after touching a record high above 722 on May 12. It’s an IBD Leaderboard stock.

Amazon Business sells a broad line of goods, such as office supplies, tools, industrial equipment, tractor equipment and office products. Competitors in the B2B e-commerce sector include Staples, HD Supply Holdings, Office Depot, Grainger and Fastenal.

By Brian Deagon for www.investors.com