Why Amazon’s Business Prime Service Matters

Simplifying procurement procedures

Amazon (AMZN) recently expanded its corporate-focused e-commerce offerings with the launch of its Amazon Prime version for businesses. Amazon Business Prime Shipping, as the new service is called, has initially been made available to Amazon’s business customers in the United States (SPY) and Germany (EWG).

Like the consumer version, the Business Prime membership is a paid subscription that offers companies free two-day shipping on Amazon purchases. Amazon portrays its Business Prime service as a solution for companies that want to simplify their procurement procedures.

Why Amazon’s Business Prime Service Matters

Business Prime pricing

For the Business Prime Shipping service, companies with up to ten users pay $499 annually. Companies with up to 100 users pay $1,299 annually, and companies with more than 100 users pay $10,099 annually.

The consumer Prime service costs $99 annually and can also be purchased on a monthly plan. Amazon doesn’t disclose its consumer Prime membership size, but Consumer Intelligence Research Partners (or CIRP) estimates that more than 90 million US consumers were on the Prime program at the end of 3Q17.

B2B e-commerce is a $1.2 trillion revenue opportunity

The launch of the Business Prime membership matters for Amazon because the service has the potential to boost its competitiveness in the massive business supplies market. Forrester Research estimates that US business-to-business (or B2B) e-commerce sales will reach $1.2 trillion by 2021, up from $889 billion this year.

The revenue opportunity for Amazon could be enormous in this market considering that just 13.1% of B2B sales in the United States will have shifted online by 2021. These numbers suggest that there is ample growth opportunity in the B2B e-commerce market.

The launch of Amazon’s Business Prime service shook traditional business suppliers, with shares of industrial suppliers W. W. Grainger (GWW) and Fastenal (FAST) sliding in response. Office suppliers Office Depot (ODP) and Staples, too, could face increased competition from Amazon with the launch of its Prime membership for companies.