"Amazon Takes Another Step Toward B2B With Amazon Supply"

The company bought Kiva Systems, which designs warehouse robots, for $775 million in March. The volume of products sold by third parties on its site rose to 36 percent: Amazon gets a commission on services provided to these third party retailers instead of earning a profit on the difference between the retail and wholesale price as a store owner would. Amazon is also a pioneer in cloud computing services.

The drift, ultimately, could transform the company into a competitor to FedExor DHL, I speculated, or cause it to calve off its business services as a separate entity.

The company took another step in that direction this week with Amazon Supply, a beta site dedicated to selling office equipment and industrial supplies to businesses. Amazon Supply offers more than 500,000 products, according to the company, including hose clamps, roller chain sprockets, drill bits, sheet aluminum, brass and other items. The site grew out of Small Parts, a supplier of equipment for science labs, Amazon bought in 2005.

In some ways, Amazon Supply is a pure retail venture, a vaguely blue collar/industrial version Amazon’s main site that sells books and CDs. Want a Reese Towpower Chrome Interlock 2-inch hitch ball? It’s yours for $10.82.

But the site also allows Amazon to function like a full-fledged distributor and/or service provider. Amazon has created a dedicated support desk and a 365-day return policy for customers. Tempered round rod steel tubing? You can get it in bulk. You can also get Hedland flow meters in bulk. Many of these items are the same sort of things that distributors like Wesco sell in bulk and the terms echo the ones granted by distributors.

Granted, the move into industrial supplies doesn’t exactly make Amazon look more like a direct, potential competitor to FedEx, but there is a common thread in Amazon Supply, Kiva, and the cloud services. Amazon essentially provides back-end, largely anonymous services to other companies, and many of these services are geared at helping them move product A to location B. Amazon is now in logistics, in other words. FedEx has also been expanding its business services to move beyond package delivery. Whether the two become competitors or collaborators will be interesting to see. Either way, Amazon arguably is entering an economic ecosystem where the other competitors won’t be traditional rivals like eBay.

“If Amazon Supply can provide a set of capabilities that underpin the core of indirect eProcurement such as enabling a range of hard dollar cost reduction benefits by decreasing off-contract purchases, lowering purchase volume in general, improving operating efficiency, increasing PO throughput per FTE and bringing greater spend under management and lower contract rates, they’ll succeed at not only becoming a preferred distributor, but embedding their service in the daily buying, asset management, inventory management and vendor management of their customers,” wrote Jason Busch at Spend Matters. “The middle market (and smaller manufacturers, universities and others) are clamoring for this type of capability. And Amazon could give it away for free, or even encourage the distribution of third-party solutions in a manner that also benefited Amazon.”

The site is only in beta and the company is still driven by the consumer site. But think ahead for a bit. If the business-to-business initiatives begin to take off, Jeff Bezos will find himself the head of one company with two distinct operating units. While they might be able to share data centers, each one will have its own challenges, channel conflicts and customers.  The services will be different.

Would it make sense to split the company? In the computing industry, contract manufacturers that expanded into being brand name manufacturers took that route. It should be an interesting story to watch.