For all the attention focused on Amazon’s new TV streaming device and expanding selection of Prime Instant TV and movies, the company’s next big money-maker could be something scarcely talked about and entirely less sexy: Wholesale distribution.
In an incredibly interesting deep-dive, Forbes reporter Clare O’Connor writes that AmazonSupply, the wholesale site that Amazon launched in 2012, is poised to become an incredibly large business for the company.
When AmazonSupply — which is still listed as a beta product — first went live in April 2012, it only had 500,000 different products for sale. It now has more than 2.2 million, spanning 17 different categories, including janitorial supplies, cutting tools, food service and groceries, and office supplies.
That’s huge, especially compared to most of the other 35,000 wholesale distributors in the U.S., almost all of which are regional and family-run companies. WW Grainger, one of the biggest players in the wholesale space, controls 6% of the entire B2B market but only has 1.2 million products. Boston Consulting Group told Forbes that AmazonSupply’s prices were about 25% lower than others in the industry.
Of course, wholesale is an extremely low-margin business, with most companies only making between 2% and 4% on each sale. However, not only is Amazon’s model and scale accustomed to those kinds of razor-thin margins, but the potential market is enormous: Wholesalers made $US7.2 trillion in revenue in 2012, according to recent Census data.
Although Amazon wouldn’t reveal how many of its 125,000 employees work on AmazonSupply, there are 17 open positions on its hiring page.
Check out the Forbes piece here >>
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.
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