RBC Capital expressed on Friday that the online retail giant, Amazon, has a segment of its business that is widely overlooked by the investors for now, but has the potential to print over $30 billion in revenue in the next few years.
Amazon Business To Turn Into A Major Source Of Revenue For Amazon
Amazon Business that offers a B2B (business to business) marketplace can be expected to come out as a major source of revenue for Amazon in the upcoming years, as per RBC analyst Mark Mahaney.
Amazon’s B2B marketplace offers a platform that has the potential to serve a wide range of customers from schools/colleges to hospitals and even large companies. Amazon Business is also known for its versatility in terms of offerings with products ranging from industry-specific to office supplies.
In a comment on Friday, Mahaney said:
“With GMV (Gross merchandise volume) over $10 billion and growing faster than Amazon’s Retail and AWS segments, it continues to gain market share while also triggering seismic changes to eCommerce business models across the industrial distributor landscape, with underperform-rated Grainger still in the crosshairs”.
As per the RBC forecast, Amazon business will see the sales hit the $52 billion mark by 2023, as the overall revenue crosses the $30 billion target.
Mahaney further highlighted that having launched only a few years ago in 2015, Amazon Business had recorded $1 billion in sales in the very first year. Within a short period of two years, the segment already had more than 2 million customers worldwide with over 200,000 sellers and hundreds of thousands of products on offer.
Amazon Business Growth Is Far Ahead Of AWS And Retail E-Commerce Business
In terms of growth, Amazon Business is far ahead of the Amazon Web Services (AWS) and the core retail e-commerce business. According to Mahaney, while the compound annual growth rate for Amazon Business in the past three years is at 115%, the retail business and AWS are lagging way behind at 28% and 48% respectively.
In another estimate, RBC valued the addressable B2B market at $67 trillion that marks thrice as big as the global retail market. The B2B market, as per the investment bank, is underserved at this stage. With Amazon’s competencies including technology infrastructure, loyal customer base, and logistics, a significant boost in the segment can be expected in the years to come.
RBC also announced its rating for Amazon stock as outperform on Friday. With a year-to-date gain of around 13%, the Amazon stock is currently exchanging hands at $1,742.