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Amazon Cozies Up to Business Customers

23 April 2012 in Trading Ideas

With Amazon.com (AMZN) having done a fair amount of damage to its original competition of bricks-and-mortar music and book sellers, it may now be time for business and industrial suppliers to look over their collective shoulders

The king of online commerce announced on Monday its new AmazonSupply service, which seeks to become the go-to destination for a wide variety of office and industrial supplies.

Although an initial target would appear to be publicly traded office-supply behemoths like Staples (SPLS) and Office Depot (ODP), Amazon’s new service is delving into other higher-end niche markets, including power and hand tools, abrasives and finishing products, fasteners, and the ever-popular hydraulic pneumatics and plumbing.

And therein lies the main nuance of Amazon’s move: Rather than another spear flung at a fellow consumer-oriented seller, this service brings the company into competition with other so-called business-to-business (B2B) sellers, which reach customers both online and via catalogs.

Generating new revenue streams is a mandate for any company, of course, but Amazon shareholders’ anxiety may be especially acute, having found themselves sitting out the recent rally in equities: shares of Amazon have slipped nearly 20% in the past six months, while the S&P 500 has climbed 11%.

Tags: Amazon