Amazon Launches ‘Business Prime’ to Bring Quick Delivery to WorkBy
Online business transactions to reach $1.2 trillion by 2021
Industrial suppliers Grainger, Fastenal drop in response
Amazon.com Inc. launched a Prime membership service for businesses, looking to replicate in the workplace the quick delivery of online orders that made it a go-to shopping destination for households.
Shares of industrial suppliers WW Grainger Inc. and Fastenal Co., which both sell industrial and construction supplies, fell on the news. Investors are concerned the world’s biggest online retailer will use low prices and convenience to win the suppliers’ business in the same manner it took market share from book stores, electronics stores, department stores and big-box retailers.
Grainger dropped as much as 4.6 percent and Fastenal dropped as much as 4.2 percent after the announcement.
Business Prime Shipping, available in the U.S. and Germany, offers free two-day delivery to companies paying $499 to as much as $10,099 a year depending on their size, Amazon said. The subscription program could also win business from office supply stores such as Staples Inc. and Office Depot Inc.
Business-to-business transactions -- a broad category that includes pens and paper for the office as well as equipment and parts used in factories -- have been slower to shift online than retail, but could be a bigger revenue opportunity in the long term, said Andy Hoar, an analyst at Forrester Research Inc. He estimates the U.S. market will reach $1.2 trillion by 2021, up from $889 billion this year.
"I don’t see the same ceiling in business-to-business sales as I do in retail," Hoar said. "In retail, people want to go to the store to see and touch things. For business sales, people don’t want to have to go to the store."