Is Amazon’s Big SMB Bet a Game Changer?

Saw this floating around yesterday. Well “floating around” probably underplays its significance.

Apparently, Amazon is planning to spend $15 billion on tools for small and medium-sized businesses. That means they’re up for spending $150 per global SMB — we usually use 100 million as the total worldwide addressable SMB market.

But Amazon’s investment in SMBs is probably focused on something closer to half or a quarter of the global number.

This means it’s really spending $300 to $600 per addressable SMB. According to some of the coverage of this announcement, Amazon has already shipped some 150 new tools since the beginning of the year.

I find the $15 billion figure staggering. It’s not that Amazon doesn’t have that kind of money. Nor do I doubt that it takes this kind of money to build really, really simple tools that SMBs can begin using quickly and relentlessly (we acknowledge that creating good software is very challenging). Nailing this challenge would be transformational.

What is truly staggering is the amount of focus Amazon is placing on the SMB market, as signaled by this investment.

According to the press release, SMBs account for 58% of all the physical gross merchandise sold in Amazon stores. Interesting how Amazon states that ‘physical gross merchandise’ – not the value of the merchandise. My guess is their investment is aimed at getting a bigger share of the higher-valued merchandise.

For toll-takers like Amazon, the higher the value, the more tolls they collect.

But I can’t help but think this is also a reaction to the success Shopify is having in the SMB market. To me, this looks like Amazon didn’t like seeing the groundswell of SMB merchants moving onto the Shopify platform.

Shopify, if you haven’t noticed, has had massive stock appreciation in 2019 — up almost 4X and is now valued around $45 billion. I doubt Shopify’s leadership welcomes Amazon’s push here. Though they can hardly be surprised that their success has elicited a response from the behemoth of eCommerce.

While the Amazon release focused on serving the SMB who are eTailers, I also cannot help but think that some of that $15 billion will be feed into broader tools and applications for SMBs. There isn’t anything stopping Amazon from offering tools for cash management, accounting, and other business processes that could bring greater efficiency to the SMB.

This would be a game-changer in the SMB SaaS industry.

For some time, Amazon has offered local service providers the opportunity to leverage their audience and market power to get local jobs — roofer, plumber, dentist, etc. It is unclear how their “selling services” is doing, though we’d imagine it, like all other Amazon initiatives, is plodding along, improving each day as more users and sellers are connected.

So the SMB space, one which we cover relentlessly, is now the subject of $15 billion of investment by Amazon. Let that sink in.

We are thinking about entrepreneurs who’ve built dozens of pitch decks, sweated through hours of questions by VCs, landed A, B and even C rounds, pushed sales organizations to the brink to acquire a couple of thousand SMBs for the SaaS tool. Now here comes Bezos and a $15 billion investment. How must that feel?

We’ll have more to say on this development next week.

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