Here’s Who Should Worry — and Who Shouldn’t
Amazon Business launched in 2015 and made about $1 billion in its first year. Today’s announcement puts it at $60 billion, up from $35 billion just four years ago. (That’s gross sales volume flowing through the platform, including third-party sellers, not Amazon’s own revenue. The press will conflate the two; you shouldn’t.) I read that number as a warning to the distribution industry: A new business model is replacing the old one, but only in some sectors and only for some transactions and distributors.
For simple products bought through simple transactions, three capabilities decide who wins: wide assortment, easy ordering, and fast delivery. Nobody beats Amazon Business on those three across as many categories and geographies. For complex products and transactions — where the customer needs selection assistance, fabrication, kitting, cutting, technical support, jobsite coordination, or commissioning — traditional distributors still offer the best solution, and it’s not close.
The line between the two models is human involvement. Amazon engineered its model, so people rarely touch a transaction. People are variable cost, and Amazon is built to avoid variable cost — or, better yet, to charge someone else for it. Amazon has said more than half of Amazon Business sales come from third-party sellers.
Amazon keeps the information flowing, the customer relationship, the data, and the commission, and passes the physical flow and its costs to the seller. And when Amazon does handle fulfillment, it doesn’t absorb the variable cost; it sells fulfillment back to the seller as a service, at Amazon’s price. Amazon split the transaction in half, kept the profitable part, and turned the other half into a revenue stream.
Here’s something most distributors get wrong. For 30 years I’ve watched distributors chase online sales as though a higher share of website revenue was automatically better. It isn’t.
Ask a harder question: How much of your revenue comes from self-service orders of products anyone could stock? That number is a proxy for your vulnerability to Amazon Business because those are the orders where the customer needed your inventory but didn’t need you. Digital sales embedded in the customer’s operations — managed inventory, VMI and jobsite logistics — are a different story. The channel isn’t the moat; being inside the customer’s workflow is, though today’s announcement shows Amazon is filling in that moat, too. You absolutely need state-of-the-art digital capabilities. That’s table stakes now. But when distributors dumb down their value propositions to drive up online sales, they move their businesses into the bull’s-eye of where Amazon is strongest.
Complexity Is a Moving Target
The wallet-share erosion isn’t easy to measure. Customers cherry-pick. They keep buying complex items from you while the easy orders shift to Amazon. That high-margin, tail-spend business is funding your delivery route density and absorbing your fixed costs. You’ll lose the profitability of the account long before you lose the account.
One more thing: The complexity line doesn’t hold still. AI moves it every year, and Amazon is a technology company that happens to sell products. Product selection that used to require a rep’s expertise is increasingly handled by software. Amazon is building those tools right now. Complexity is a moat for you only if you keep deepening it. The good news is that AI cuts both ways. It’s also the best tool distributors have ever had for delivering complex, high-touch service at a cost the model can finally afford.
No one has credibly sized the U.S. wholesale market by complex versus simple, but in an $8 trillion industry, both categories are enormous. Expect Amazon to keep adding AI-enabled capabilities — configurators, virtual technical support, and tools we haven’t seen yet — that reclassify “complex” as “simple,” making a growing share of the total easy to order online.
Today’s announcement names the tools already shipping: an AI buying assistant, AI-driven savings insights, spend-anomaly monitoring, and guided buying. And it’s not only software. Amazon is rolling out dedicated business delivery fleets with scheduled windows and palletized drop-offs, attacking the physical complexity that used to belong to distributors alone.
Scale Changes the Equation
Amazon Business has one more scale advantage. Most distributors operate in one country or a few. Amazon Business is active in 11, a combined wholesale market worth double-digit trillions. And that scale compounds. Amazon amortizes every dollar of technology and AI investment across 11 markets at once, while most distributors amortize theirs across one. That’s why the capability gap can widen even while you’re investing. No wonder Amazon is pursuing this opportunity so aggressively.
So, what should distributors take from today’s number? Keep it in perspective. Sixty billion dollars is still a small slice of a multitrillion-dollar industry. But it was $1 billion 10 years ago. Three moves matter:
- Build state-of-the-art digital capabilities, including AI, not to maximize online revenue but to meet customers wherever the transaction belongs.
- Make complexity your strategy, not your legacy. Add services, integration, and technical depth faster than technology commoditizes them.
- Watch your mix. If self-service sales of undifferentiated products are your fastest-growing segment, you’re growing the part of your business Amazon takes first.
The distributors that thrive alongside a $60 billion Amazon Business will be the ones that stopped trying to out-Amazon Amazon and made themselves too complicated to replace.
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