On a day when both the NYSE and the NASDAQ composite indexes remained nearly flat, Grainger’s share price dropped 5.3%, Fastenal stock lost 3.6% of its value and other broad-line distributors suffered significant value erosion as well. The likely culprit: Amazon Business announced it is launching Business Prime Shipping, a paid annual membership program for registered multi-user business customers in the United States and Germany.
While the move impacts traditional B2C retailers growing their B2B markets – from Staples to Costco to Walmart – those companies did not suffer similar consequences. Staples is no longer a publicly-held company since it was purchased by private equity firm Sycamore Partners earlier this year, but Walmart was down less than 1% while Costco moved up slightly. It appears that the equity markets believe Amazon Business is primarily a threat to distributors.
In the U.S., Business Prime Shipping offers unlimited free two-day shipping on eligible items for all users on an Amazon Business account. The company says the service is intended for the Amazon Business customer to ship items to its own locations for its own use, and not to purchase items for the purpose of resale, rental, or to drop ship to customers or other parties. Amazon is offering a free 30-day trial at www.amazon.com/businessprimeshipping.
There are exclusions for non-eligible products. In its terms and conditions, the company says certain purchases may be entitled to free standard shipping instead of two-day, based on size, weight, destination and other shipping characteristics at the company’s discretion.
“Business Prime Shipping combines the wide selection of products available to Amazon Business customers, with the speed and convenience that customers have come to know and love from Amazon Prime,” said Greg Greeley, Vice President of Amazon Prime, in a statement. “We are excited to introduce a shipping program designed to meet the needs of businesses and will continue to innovate on behalf of customers to make business purchasing even easier.”
The annual Business Prime Shipping membership is based on the number of users on the business account: $499 for up to 10 users, $1,299 for up to 100 users, and $10,099 for over 100 users. Once the customer selects the appropriate membership, all users on the account will receive an email notifying them that Business Prime Shipping has been enabled. Any new user added to an existing Amazon Business account with Business Prime Shipping will be automatically enrolled in this membership.
The launch of Business Prime Shipping follows the continued build-out of its same-day delivery services on the consumer side. Same-day shipping is available for orders over $35 on “qualifying items.” There’s no description of these items and buyers apparently only see if this option is available during checkout.
Amazon Business launched in 2015 to replace Amazon Supply, which started in 2012, but built its B2B platform on the acquisition of SmallParts.com, an appliance parts web site, in 2005.
MDM will be publishing a three-part series examining Amazon Business’ actions and their implications for distributors beginning in November.
