In 1994, Jeff Bezos started an ‘online everything store.’ He began by selling books on this e-commerce platform and reached 1,80,000 accounts within a year. In May 1997, Amazon.com became a public company with $54 million on NASDAQ.
The company expanded quickly and spread its products in music, electronics, videos, software, video games, games, toys, houseware, and much more. Its personalised recommendations and customer reviews developed a consumer community.
Soon, in 2000, Amazon allowed small companies and individuals to sell their goods and products on the Amazon platform.
Bezos always claimed Amazon was a technology company and not a retailer, substantiated by Amazon Web Services (AWS) launch in 2002. Amazon kept adding new ventures to its company, such as Kindle in 2007 and Amazon Encore in 2009.
From a book store to an ‘everything store’, Amazon has also become a giant global eCommerce company. It is now the world’s sixth-largest company, with revenues touching almost $1500 billion annually.
Amazon’s Revenue Streams
Amazon has spread its revenue resources in various domains: one-time sales, advertising, commission on sales, licenses, web services, patents, pay-per-use, support subscriptions, and other subscriptions.
Some of Amazon’s earning resources are as below:
- Amazon Marketplace: Amazon.com contributes more than 50% of its income. It gains money through its sellers promoting and advertising its products on the Amazon store.
- Amazon Prime: A subscription business model contributes to the brand’s growth. It provides subscribers access to a music and video streaming catalogue, free two-day shipping, and unlimited photo storage. In addition, it has more than 150 million members on Amazon Prime (1).
- Amazon Kindle: An e-reading platform that allows users to buy, browse, download, and read books, newspapers, and magazines. It also enables independent authors to publish their e-books and info-products with royalty fees between 30 to 70% on sales.
- Amazon Web Services: A complete IT structure platform contracts organisations, companies, and institutions at a low cost but gains significant profit for the company.
- Amazon Advertising: Amazon Ad platform is a marketing channel that provides sponsored ads and videos.
Customer Segments
We can divide Amazon’s customer segments into three groups:
- Sellers: It consists of all the companies/ brands/ organisations selling their products using Amazon’s e-commerce platform.
- Buyers: Millions of people worldwide acquire products and services on Amazon’s channels. Amazon keeps track of customers’ engagement, interest, and personal information and uses it to boost customer satisfaction.
- Developers: A community of customers and partners on Amazon Web Services involved virtually every industry of every size, such as large enterprises, startups, public sector organisations, etc.
Value Propositions
Amazon offers the most convenience, lowest price, and widest range of value propositions to its consumers. There are three value propositions in the Amazon’s business model:
- Low Price: Amazon keeps the product value as low as possible throughout its product catalogue.
- Fast Delivery: Customers always have an option for faster delivery of their order by paying extra charges or purchasing a prime account subscription. It also offers free delivery to all customers when their purchase crosses a certain amount.
In addition, it provides one of the safest, most reliable, agile delivery at a reasonable price.
- Wide Selection of Products: Being a mix of a retail and technology company, Amazon has a wide range of products.
Channels
Amazon’s website is one of its most important and largest channels. Other important channels include Amazon Prime, the Amazon app, and the affiliate program. Its marketing is primarily digital, as it is an internet-based company.
Customer Relationships
Amazon has always focused on healthy and long-term customer relationships. It maintains its communication with customers through various channels, such as phone calls, SMS, email, online chat, chatbot, etc.
Key Resources
Amazon’s key resources are technological infrastructure and physical spaces of the company, like warehouses, supply chain structures, offices, and automation.
Amazon majorly depends on its human resources (2), like engineers, designers, and developers, who help it be at the top in the marketplace worldwide.
Key Activities
Amazon’s key activities include developing, maintaining, and expanding all its platforms, like e-commerce, cloud computing, streaming, entertainment, etc.
Activities are invested in website management, application development & management, the entire supply chain, information security, storage, and logistics.
Key Partners
Amazon’s business largely depends on its partners, which include:
- Sellers: Amazon’s first source of revenue generators is its sellers, including 8 million worldwide.
- Affiliates: Bloggers work as Amazon affiliates, earning a commission from referrals leading to sales through promoting traffic to the platform.
- Content creators: Independent authors publishing on Amazon Kindle contributes mainly to Amazon’s total revenue.
- Developers: AWS segment has developers who work as partners in specialising AWS services.
- Subsidiaries: Amazon includes companies providing stores, storage spaces, and systems for it in subsidiaries.
Cost structure
It includes a customer service centre, IT structure, software development & maintenance, marketing, information security, and expenses in physical space maintenance.
Competitors
Amazon is one of the leading companies worldwide. However, it has various competitors with increased advancements and novel business competitors. Online stores, such as Alibaba, Walmart, Otto, Flipkart, eBay, Jingdong, etc., are some Amazon rivals.
Conclusion
Amazon has a unique business model that is not very human-intensive. Amazon quickly sells products in any country with a bit of groundwork, making it one of the most scalable multinational companies.
At the same time, Amazon has several competitors, from e-commerce sites to entertainment companies. But, Amazon has maintained its aggression in almost all of its business lines.
Moreover, Amazon has consistently implemented technological advancements since its foundation. For example, Amazon uses automation on an entire departmental store that does not involve humans. It allows Amazon to reach its ambitious revenue targets.
Amazon is constantly expanding in the global and digital marketplace. It is an increasingly productive brand adapting quickly to changing market demands.
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