Clicky

Amazon Set to Invest $18 Billion in Small and Medium Business in 2020
by Daniel Newman | September 1, 2020

The News: Amazon today announced it is on course to invest $18 billion this year to help independent businesses sell to customers, including investments in logistics, tools, services, programs, and people. Since the beginning of the year, Amazon has launched more than 135 free tools and services to help sellers grow their sales in Amazon’s store. In the next twelve months, the company will provide more than 500,000 U.S. small and medium-sized businesses (SMBs) currently selling on Amazon with online selling guidance, education, and support, and the company plans to onboard an additional 100,000 U.S. businesses as new sellers in its store.  Read the full release on Amazon.

Analyst Take: Amazon has had a busy year as the Covid-19 pandemic has driven significant reliance on the company to fulfill business and customer needs throughout the U.S. and around the world. While the sales and revenues have soared, as have the profits, Amazon can sometimes be the recipient of significant push back as a nemesis to small business.

I believe, however, that Amazon has been diligent in empowering small businesses and the announcements today reflect that the company is widely committed to helping small and mid-size companies to succeed in today’s challenging economic climate.

Today’s news drew five key points that are worth paying attention to as the company continues to make investments in SMBs.

  1. The Size of the Investment: Amazon is on course to invest $18 billion this year to help independent businesses sell to customers, including investments in logistics, tools, services, programs, and people. This is not a token amount, but a very large and material commitment to enable smaller companies to continue to build and thrive in the wake of a lot of uncertainty and unexpected change that took place this year and into the future.
  2. Continued Investment Plans around Prime Day: Amazon plans to invest an additional $100 million to help small businesses reach new customers this Prime Day and throughout the holiday season. This new investment will go toward putting a spotlight on the diversity of small businesses selling in Amazon’s store, positioning them for increased sales during Prime Day and throughout Q4. All of this continues to illustrate the company’s desire to focus on bringing its SMB partners into the mix of its largest promotional selling day. I wouldn’t be surprised to see this number grow in coming years.
  3. Amazon’s SMB Partners are Growing: In the twelve-month period ending in May, American SMB sellers sold more than 3.4 billion products, up from 2.7 billion year-over-year, and averaged $160,000 in sales, up from approximately $100,000 a year prior. The growth overall is promising and seeing the smallest sellers moving from 100k to 160k is encouraging as a vehicle to see these small companies grow into larger resellers that will create jobs and further add to the economy.
  4. Training and Educating SMBs: In the next twelve months, the company will provide more than 500,000 U.S. small and medium-sized businesses (SMBs) currently selling on Amazon with online selling guidance, education, and support, and the company plans to onboard an additional 100,000 U.S. businesses as new sellers in its store.  The Amazon marketplace is becoming a vehicle for starting small businesses as well as helping small companies grow. Much like Apple and Google with their app stores, seen as a way to help developers build and launch new apps–Amazon is a vehicle for small vendors and traditional brick and mortars to grow their business footprint and digitally transform.  The company is furthering this educational effort through adding events and growth opportunities remotely. This week the company hosted Amazon Accelerate – a three-day virtual summit for U.S. SMBs who are currently selling in Amazon’s store or interested in doing so.
  5. Tools and Tech at Scale: Amazon has launched 135 free tools this year for sellers to help them gain insights, protect and build their brands, and delight customers. For example, “Repeat Purchase Behavior” provides insights that let sellers leverage data on how customers engage with brands. “Brand Follow” represents Amazon’s investment in customer relationship management tools, allowing sellers to connect with customers who have shown an interest in their brand through features like personalized posts on their homepage. Small companies often lack the tools and technology to scale, but Amazon can offer its tools and analytics to help small business partners optimize. I see more of this being in play in the future.

A company the size of Amazon, with such growth and success will always face some scrutiny for how their decisions impact the smaller businesses. However, I believe the company is making a sustained effort that is quantifiable in supporting smaller businesses and enabling these businesses to be more competitive in a rapidly transforming business environment.

Further investment and commitment will be key for its marketplace partners to continue to scale and succeed long term–which will be important as we attempt to strengthen the economy as we move past the 2020 pandemic and return to a new/next/more normal situation.

Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.

Read more analysis from Futurum Research:

Dell Outpaces Expectations on Revenue and Earnings in Q2

Splunk’s Transformation: The Real Story Behind Its Earnings

HPE Shows Resilience With Much Improved Q3 Results

Image: Amazon

Daniel Newman