Defining the Amazon business model can be kind of a curious task, as we observe that this global trade giant increases its reach year by year, both geographically and in terms of products and services offered. To give you an idea of the size of the business we’re talking about, in the time it takes you to read this simple article, Amazon may have added about a million dollars more to its revenue.
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Back in 1994, Jeff Bezos, a former Wall Street hedge fund executive and a visionary who was already aware of the potential of the internet and the e-commerce platforms, took the decision to give the first step in creating an “online everything store” — yes, he knew steroide zu verkaufen from the beginning that this was Amazon’s objective. At first, he thought about naming the company “Cadabra” (from abracadabra). However, his lawyer, Todd Tarbert, advised him that the name could be seen as kind of obscure. Besides, it sounded like “cadaver”, especially over the phone.
After the new name was decided, the next decision would be about the product to be sold on the e-commerce platform. Bezos found that the most logical option would be to sell books. Going against financial journalists and analysts, that just couldn’t see the growth of the internet as Bezos did, Amazon.com reached 180,000 accounts in its first year. In May 1997, Amazon.com became a public company, with $54 million on NASDAQ.
At the end of the same year, there were 1 million accounts and $148 million in revenues (what would become $610 million the following year). The company expanded rapidly and began selling music, videos, electronics, video games, software, houseware, toys, games, and more. Moreover, what attracted customers were its personalized recommendation tools and customers reviews, thus developing a community of consumers. In 2000, Amazon opened room for small companies and individuals to sell their goods through the platform.
Two years later, Amazon Web Services (AWS) was launched, confirming what Bezos claimed from the start: Amazon was not a retailer, but a technology company. From that year on, AWS has encompassed statistics on the internet for developers and marketers, its Elastic Compute Cloud that rents out computer processing power, and its Simple Storage Service, for renting data storage. Kindle e-readers appeared in 2007, fostering the e-book market.
In 2009, the company launched Amazon Encore, its first publishing line, which would also allow individuals to publish their own e-books. Two years later, it would become Amazon Publishing, aiming to develop its own titles. Well, Amazon went from a bookstore to an “everything store” and then to a worldwide e-commerce giant. But the brand definitely didn’t stop there — and its potential never seems to end. Perhaps what keeps its audience so close is its profit margin, which remains low on any product/service offered by the company.
For the buyer, it is comfortable to know that Amazon will always bring a reasonable and competitive price in all fields and products. And for sellers who use the multisided platform, it’s convenient to be sure they can easily display their products on the website and make sales on all continents on Earth. Nowadays, Amazon is recognized as the largest retailer on the planet, a brand for which not even the sky seems to be the limit.
Since Amazon is a publicly traded company, it is owned by a number of institutional and individual shareholders. However, Jeff Bezos, its founder, still holds a major part of the company (about 10%), making him one of the most influential shareholders in the company. However, in July 2021, Bezos stepped down as CEO to become Executive Chairman, leaving Andy Jassy for the president and CEO positions nowadays. Differently from Google x Alphabet and Facebook x Meta relations, Amazon is actually the official name of the holding group, which includes all of its arising services, such as Amazon Music, Amazon Prime Video, Kindle and Alexa devices, Amazon Web Services (AWS), among many others.
To understand how Amazon makes money, we need to take a look at each of the different operations that are under this big corporate umbrella. These operations have successfully helped the company achieve year-on-year profitability, which has fueled its growth. They are:
The Amazon Business Model can be seen in the business model canvas below:
The customer segments of Amazon can be divided into basically three groups: sellers, buyers, and developers.
Jeff Bezos defines that Amazon’s business model is based on three value propositions: low price, fast delivery, and a wide selection of products. However, looking at these three consumer benefits, we can say that Amazon’s greatest value proposition is convenience because the audience understands that, with just the help of a device connected to the internet, they have access to the product catalog of the largest retailer in the world, with a reasonable price and an agile, safe and reliable delivery service.
Certainly, the Amazon website is its largest and most important channel. But important channels also include the brand’s app, Amazon Prime (its streaming, entertainment, and subscription platform), and its affiliate program. As an internet-based company, its marketing is basically digital, including advertisements, sponsored publications, and e-mail marketing. Overall, the company invested over $20 billion in media in 2022.
Amazon’s focus, no doubt, is to have a healthy and long-lasting relationship with its customers. For this reason, they maintain several communication channels open with their consumers — such as reviews and comments on the platform, telephone, online chat, and e-mail contact. Plus, they don’t usually take a lot of days to give feedback.
Amazon’s revenue streams consist of:
Hands down, “the one” Key Resource of Amazon is its technological infrastructure, which needs to be broad and very secure, in order to keep the whole chain running without interruption or losses (back in 2013, Amazon was down for about 40 minutes, which resulted in a loss of more than US$ 5 million in sales). Aside from that, other key resources include physical spaces of the company, such as offices, warehouses, supply chain structure, and automation, among others. And, of course, human resources are essential for Amazon, which needs to guarantee A-players among its designers, engineers, developers, etc.
Amazon’s key activities are all about the development, maintenance, and expansion of its gigantic platform. Therefore, the brand invests in website and app development and management, management of the entire supply chain, storage and logistics, information security on all platforms (including e-commerce, streaming, cloud computing, etc.), production of films, series, and other products for its video platform, as well as marketing for all of its products and services.
Amazon’s key partners consist of:
The cost structure of Amazon includes its complete IT structure, customer service center, software development and maintenance, information security, and marketing, as well as all expenses involved in maintaining its physical spaces, such as fulfillment centers, sortation centers, and delivery stations.
Below, there is a detailed SWOT Analysis of Amazon:
-> Read More About Amazon’s SWOT Analysis.
Think about it: Amazon isn’t just a part of today’s business landscape, it’s shaping it. Everywhere you look—whether it’s globally or in the digital space—Amazon’s footprint is undeniable. Its rapid adaptation to market changes is impressive, but what really sets it apart? It’s their rock-solid multisided platform business model. This isn’t just a lucky break; it’s strategic genius. Now, if you’ve ever found yourself wondering just how Amazon ticks, or what’s under the hood of their roaring engine of success, I’ve got some great news for you. We’ve rolled up our sleeves and put together an in-depth guide all about Amazon’s business model. Curious? Dive in and check it out here.
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One of the most serious risks to Amazon's success is the growing anxiety about online purchasing as a result of identity theft and hacking, which exposes its customers' personal information.
The company has been sued by publishers and competitors in the retailing industry as a result of its aggressive pricing methods.
nice analysis ,thanks