Amazon, which yesterday reported blockbuster earnings (see below), has found a potentially lucrative new customer for its retail platform, Axios' David McCabe reports.
Its next target: Government officials who spend taxpayer dollars.
Why it matters: Collectively, federal and local officials spend billions of dollars a year on goods and services, ranging from copy paper to musical instruments for schools. Amazon’s attempt to capture those dollars alarms its critics, who say that taxpayers could get a raw deal while the tech giant expands its dominance.
Driving the news: Amazon is pitching governments to adopt its Amazon Business product, which is a marketplace built for corporate users who often buy products in bulk or for specific workplace needs. Like on the consumer-focused platform, Amazon takes a cut of third-party sales.
- Getting governments to use Amazon Business is complicated, since government purchasing contracts are closely scrutinized and subject to complex regulations and approvals. Agencies also often have to buy products from certain types of businesses.
- An Amazon spokesperson said in a statement that "tens of thousands of government customers are using Amazon Business" and are taking advantage of features like discounts and its ability to find suppliers that meet particular goals.
Details: A new program is in the works that will allow federal government workers to make some low-value purchases via consumer websites. Amazon is seen as a likely contender.
- Federal officials anticipate the market for these purchases could be as large as $6 billion to $8 billion.
- The Amazon spokesperson declined to comment on its plans regarding the initiative, which has not yet reached the stage it choses the companies.
Of note: Amazon already has established programs with the Federal Emergency Management Agency and the Air Force to capture some of the money their employees spend outside of the meticulously negotiated contracts that govern some federal spending.
- And, it's reaching deals to handle purchases with localities all around the U.S.
The big picture: Amazon is becoming more and more enmeshed with the machinations of government and the programs it administers — and it has the lobbying budget to match. Some services it already is providing include...
- Being a key cloud computing provider to government agencies.
- Testing if it can accept a government nutritional benefits program, SNAP, in New York.
Critics say Amazon’s move into government contracts raises several red flags, including possible favoritism by officials on the other side of the bargaining table who could create requirements that only Amazon can meet or otherwise skew the process.
- And there are questions of whether Amazon will deliver the lowest prices for taxpayers.
- “With Amazon it’s a black box,” said Stacy Mitchell, who co-authored an institutional report on a key Amazon contract with cities. “There’s no ability to see as a citizen the decision-making process, whether it was fair and equitable, and whether the outcome was a prudent use of dollars.”
Go deeper: David has more here.