Amazon may not be the first company that comes to mind when you think of Main Street U.S.A., but the e-commerce giant is putting in a monumental effort to keep small businesses afloat within its own platform. The company is on track to invest a total of $18 billion throughout 2020 in small and medium-sized businesses (SMBs) through various forms of assistance in logistics, services, programs, customer support and Prime Day assistance.
In the next 12 months, Amazon plans to provide the more than 500,000 U.S. SMBs currently selling on its e-commerce platform with online selling guidance, education, and customer support. The company plans to onboard an additional 100,000 U.S. businesses as new sellers within its e-commerce site.
Amazon said third-party merchants continue to comprise more than 50 percent of all units sold in its store, and continue to grow faster than its own first-party sales. U.S. SMB sellers sold more than 3.4 billion products in a 12-month timeframe concluding in May, averaging $160,000 in sales, with the number of sellers that have reached $1 million in sales growing by 20 percent. These totals are up from 2.7 billion products sold by SMBs in the year prior, averaging $100,000 in sales.
Amazon made the announcement at its Amazon Accelerate three-day virtual summit held Sept. 1-3 specifically for U.S. small businesses that are either currently selling in Amazon’s store or interested in doing so.
“At Amazon, our mission is to be Earth’s most customer-centric company, and part of fulfilling that mission is connecting small businesses with customers,” Jeff Wilke, CEO of worldwide consumer at Amazon, said at the event. “Amazon’s success is directly tied to the success of independent businesses across the U.S. We are passionate about supporting small businesses, investing and inventing on their behalf to help them be resilient through Covid-19 and beyond.”
The company has never been a stranger to investing to improve the welfare of its business, even if it cuts into profit. During the Covid-19 pandemic, Amazon invested $4 billion in costs related to the crisis, with $500 million going to front-line employees and delivery partners as a “thank you bonus,” according to CEO Jeff Bezos.
Amazon anticipates spending more than $2 billion during the third quarter on additional coronavirus-related measures, including procuring personal protective equipment, deep cleaning its facilities and wage increases for employees.
The business is also looking to grow its “tech hubs” in six cities and fill 3,500 new tech and corporate jobs throughout the country. The six targeted cities—which include Detroit, Dallas, New York, Denver, San Diego and Phoenix—will be part of an investment exceeding $1.4 billion. Teams in the cities will bolster different businesses throughout Amazon, including Amazon Advertising, Alexa, Amazon Fresh and Amazon Fashion.
Despite all these investments, Amazon still has deep pockets, with the company’s operating cash flow increasing 42 percent to $51.2 billion in its second quarter.
While the e-commerce giant hasn’t officially selected dates for its annual Prime Day event, which was delayed by the pandemic from its traditional spot in July, it is ramping up investments to help smaller businesses when the event finally does happen.
Amazon will invest an additional $100 million to help global small businesses increase their sales and reach new customers both on Prime Day and throughout the holiday season. The company said that during Prime Day 2019, which lasted 36 hours, third-party sellers—mostly SMBs—exceeded $2 billion in global sales.
Further details will be announced closer to Prime Day, which is reported to be taking place in October.
Since the beginning of the year, Amazon has launched 135 free tools designed to help sellers gain insights, protect and build their brands. For example, the Repeat Purchase Behavior tool provides insights aimed at letting sellers leverage data on how customers engage with brands. Brand Follow, Amazon’s own version a customer relationship management tool, is designed to allow sellers to connect with customers who have shown an interest in the brand through features like personalized posts on the homepage.
Aside from these details, Amazon has otherwise been vague about where the $18 billion is specifically going. But as the e-commerce giant continues to reel in profits in the face of a major crisis and onboard more sellers onto its platform, an ongoing investment in more resources ahead of the holiday season would stand to benefit all parties involved.
With so much uncertainty related to the status of small businesses across the U.S., and how long their physical spaces can remain open, moving to an online platform may be one of the only choices these companies have left. Fifty-eight percent of small business owners said they were worried about permanently closing, according to a July U.S. Chamber of Commerce survey.
Amazon hasn’t been the only top commerce player looking to use its own platform to help SMBs gain an audience. Walmart is opening its Walmart Marketplace to 1,200 Shopify sellers this year. The partnership will greatly expand the reach of the participating brands by placing them in front of Walmart Marketplace’s 120 million monthly visitors.
Shopify, which is used by more than 1 million businesses, has made a considered effort to boost its visibility and capability for its small business clientele, especially during the pandemic. Shopify already launched its consumer-facing Shopify Shop app in April to give local businesses direct mobile access to more shoppers. In May, the company launched a new package of services catered to creating a more digital-savvy SMB, with the debut of a finance management platform and merchant debit card, an installment payments option and increased access to its Shopify Fulfillment Network.