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Amazon Business Model

The definition of what constitutes the Amazon company’s business strategy can be an enigma, since we can see that the global company is expanding its reach every the year in both geographic terms as well as in terms of the products and services it offers. To provide you with some idea about the magnitude of the company we’re talking about, during the time it takes to read this report, Amazon may have added one million dollars to its revenues.

Contents

  • A short background of Amazon
  • Who Owns Amazon
  • Amazon’s Mission Statement
  • What is the way Amazon earns money
  • Amazon’s Business Model Canvas
    • Download FREE!
    • Amazon’s Customer Segments
    • Amazon’s Value Propositions
    • Amazon’s Channels
    • Amazon’s Customer Relationships
    • Amazon’s Revenue Streams
    • Amazon’s Key Resources
    • Amazon’s Key Activities
    • Amazon’s Key Partners
    • Amazon’s Cost Structure
  • Amazon’s Competitors
  • Amazon’s SWOT Analysis
    • Amazon’s Strengths
    • Amazon’s Weaknesses
    • Amazon’s Opportunities
    • Amazon’s Threats
  • Conclusion

A brief background of Amazon

In 1994 Jeff Bezos, a former Wall Street hedge fund executive and a visionary aware of the possibilities of the internet as well as the online shopping platforms, made the decision to take the first step to creating the “online everything store” -Yes, he was aware at the outset that that was the aim of Amazon. He initially thought about calling his company “Cadabra” (from abracadabra). However, his lawyer Todd Tarbert, advised him that the name might be viewed as obscure. In addition, it sounded similar to “cadaver”, especially over the phone.

Once the name change was settled The next choice was about the item to be offered on the platform. Bezos determined that the best option is to offer books. Contrary to analysts and financial journalists who didn’t understand the growing popularity of the internet like Bezos could, Amazon.com reached 180,000 accounts within its first year. On May 27, 1997 Amazon.com went public, with a market capitalization of $54 million in its NASDAQ.

In the year, there was 1 million accounts, and $148 million in revenue (what would be $610 million in the next year). The business grew quickly and started selling videos, music, electronics and video games, as well as householdware, software toys, games and much more. Additionally, what attracted customers was its customized review tools and recommendations for customers and thereby creating an audience of customers. Since 2000, Amazon made it possible for small-scale businesses and individuals to market their products through the platform.

A few years after that, Amazon Web Services (AWS) was created, which confirmed the notion that Bezos stated from the beginning: Amazon was not a retailer, but rather a tech business. Since then, AWS has encompassed statistics on the web for marketers and developers as well as the Elastic Compute Cloud that rents computers processing power and it’s Simple Storage Service, for renting storage for data. The first Kindle-based e-reader was released in 2007, helping to expand the market for electronic books.

In 2009, the company introduced Amazon Encore, its first publishing service that also allowed people to create their own ebooks. A few years after, it would be transformed into Amazon Publishing, aiming to create its own books. The result was that Amazon changed from a traditional bookstore to becoming an “everything store” and then to become an international e-commerce firm. But the brand hasn’t stopped there and its possibilities never seem to come to an end. The reason it keeps its fan base at a constant pace is its profit margin that is low for every product or service that the company offers.

For buyers It is a comfort to be confident the fact that Amazon will always provide the best cost in all fields and products. If sellers use the multi-faceted platform it’s easy to ensure that they are able to simply display their items on Amazon’s website and generate sales across all continents of Earth. In the present, Amazon is recognized as the largest online retailer in the world and a brand that no limit appears to be the limit..

Who Owns Amazon

As stated, Amazon is entirely owned by its billionaire founder Jeff Bezos. In July 2021, Bezos stepped down as CEO, and became Executive Chairman, and he was replaced by Andy Jassy for the president and CEO positions in the current. Contrary to Google x Alphabet and Facebook x Meta relationships, Amazon is actually the brand name of the holding company that includes all of its new services like Amazon Music, Amazon Prime Video, Kindle and Alexa devices, Amazon Web Services (AWS) and many more.

Amazon’s Mission Statement

Amazon is guided by four fundamentals that are based on customer obsession instead of focusing on competition enthusiasm for innovation and a commitment to continuous improvement and long-term planning. Amazon strives to be the most customer-focused business and the best place to work and the most secure workplace.

How Amazon earns its money

To know the way Amazon earns money, it is necessary to look at each of the diverse activities that fall under the huge corporation. They include:

  • Amazon Marketplace: Amazon Marketplace is the company’s primary revenue stream, Amazon.com accounts for more than 50% of its revenue. It is essentially, Amazon asks for a fee from sellers to promote and market their products.
  • Amazon Prime: It’s Amazon’s subscription-based business model that has been crucial in the growth of the brand. For an annual fee, Prime members can access the company’s music and video streaming catalogue and two-day free shipping and unlimited storage for photos, and more. Prime today has over 150 million subscribers;
  • Amazon Web Services It’s a cost-effective total IT structure platform which is used by organizations, companies and institutions all over the globe. It’s not the sole source of revenue but it’s certainly the most profitable;
  • Amazon Kindle: It’s Amazon’s e-reading platform which lets customers purchase books, browse, and download them magazines, newspapers, and magazines which are accessible at Kindle Store. Amazon does not earn a lot of profit through Kindle as a whole, but it does this it does so by attracting customers to its Prime Membership plan. In addition, the platform permits individuals to write their own info-products and ebooks, charging between 30 and 70% of the royalties earned generated by sales
  • Amazon Patents: Amazon holds over 1,000 patents, many that are licensed to other businesses.
  • Amazon Advertising: Amazon Ad platform offers sponsored advertisements and videos. It’s an extremely effective marketing channel since those who use the platform is already with the intent of purchasing something.

Amazon’s Business Model Canvas

The Amazon Business Model is visible on the diagram of the business model below:

DOWNLOAD HIGH-RESOLUTION PDF OF THE AMAZON BUSINESS MODEL CANVAS

Amazon’s Customer Segments

Amazon’s customers of Amazon can be classified into three distinct groups that are buyers, sellers and developers.

  • Sellers are all companies that utilize Amazon’s online marketplace to sell their goods to the widest customer base.
  • Developers are the entire community members of Amazon Web Services (AWS) — Amazon’s cloud computing platform. According to its website says on its website it, they are partners and customers “across virtually every industry and of every size, including startups, enterprises, and public sector organizations”.
  • The customers include the million of people around the globe who purchase goods and services via Amazon’s channels. Amazon analyzes its customers using certain aspects, like the level of engagement, interest, as well as personal data (age gender, gender, geographical space, language, and other things).

Amazon’s Value Propositions

Jeff Bezos defines that Amazon’s business model is founded upon three value propositions which include: low cost rapid delivery, speedy delivery and a large range of items. When we consider these three advantages for consumers we can conclude that Amazon’s most valuable value proposition is the convenience since the customers understand that, with the aid of a device that is connected with the web, they can have access to the entire catalog of the biggest retailer around the globe, and at a affordable prices and a fast, secure and secure delivery service.

Amazon’s Channels

Of course, it is true that the Amazon website is its biggest and most significant channel. Other important channels include its app, Amazon Prime (its streaming entertainment, subscription, and platform) and the affiliate programme. Since it is an online-based business its marketing is largely digital, which includes advertisements, sponsored publications and the use of e-mail for marketing. In total, the company invested more than 10 billion dollars in media during the year of 2019.

Amazon’s Customer Relationships

Amazon’s primary goal, without doubt is to maintain an ongoing and healthy connection with their customers. To do this, they keep a variety of communication channels that are open to their customers including reviews and comments on the site as well as telephone or online chat, as well as email contact. Additionally, they do not typically require a long time to provide feedback.

Amazon’s Revenue Streams

The Amazon revenues streams comprise:

  • One-Time Sales
  • Commission on Sales
  • Advertising
  • Subscriptions (Amazon Prime)
  • Web Services (AWS)
  • Licenses
  • Patents
  • Pay-Per-Use & Support Subscription

Amazon’s Key Resources

It’s a no-brainer, “the one” The most important resource that is the core resource of Amazon is its technology infrastructure, which has to be a wide and secure for the sake of keeping the entire chain operating without interruption or loss ( back in 2013, Amazon was down for around 40 minutes, resulting in the loss of over US5 million dollars on the sales). Other essential resources include the physical areas that the company uses like warehouses, offices and supply chain structures and automation, in addition to. Also human resources are vital for Amazon that must be sure that its engineers, designers and developers.

Amazon’s Key Activities

Amazon’s principal actions focus on the creation, maintenance and expansion of its massive platform. This is why the company invests in app and website creation and administration, and also the management of its complete supply chain logistics and storage as well as information security across all platforms (including streaming, e-commerce and cloud computing and more. ) as well as the production of series, films and other content for its video platform in addition to marketing for all its services and products.

Amazon’s Key Partners

Amazon’s principal partners comprise:

  • Sellers The most significant partners of the brand, as they are Amazon’s primary stream of revenues. There are about 8 million people worldwide which accounts for greater than 50% of Amazon’s revenue.
  • Affiliates Bloggers who receive a fee for any referrals that result in the sale. Apart from aiding sales, they help to drive traffic to the site;
  • Developers are the members in AWS. AWS segment. Or according to Amazon own definition says, “thousands of systems integrators who specialize in AWS services and tens of thousands of independent software vendors (ISVs) who adapt their technology to work on AWS”;
  • Content Creators Independent authors who are able to publish their work through Kindle Direct Publishing;
  • Subsidiaries These are companies that offer storage spaces stores, systems, and stores as well as brands and products made from Amazon itself, like Amazon Essentials, Amazon Elements, Amazon Elements, Kindle, Alexa, etc.

Amazon’s Cost Structure

Amazon’s Cost of the structure of Amazon includes its entire IT structure Customer service center as well as maintenance and development of software as well as information security and marketing, in addition to the expenses associated with maintaining its physical facilities including fulfilment centers,sortation centers as well as delivery points.

Photo by Jordan Stead. Source: https://www.aboutamazon.com/amazon-fulfillment/our-fulfillment-centers/why-amazon-warehouses-are-called-fulfillment-centers

Amazon’s Competitors

  • Stores online There is a good chance that there are 24 million websites today. Particularly with regards to quality and expertise smaller specialty shops may become “stronger” than Amazon in their respective fields.
  • Walmart: While the majority of its revenue comes from brick and mortar stores however, it’s a world-class company with a substantial presence on the internet. It is the second most-popular online retailer across the U.S.;
  • Alibaba is a Chinese-based online retailer, which specializes in online wholesale sales. It has separate business units. Alibaba particularizes itself exclusively on B2B, Taobao on B2C Taobao on B2C, and Tmall for multinational brands.
  • Otto: A European online retailer that sells other brands’ products through its platform. Its user-friendly interface certain top categories include electronic, fashion, homewares and sports.
  • Jingdong (JD): Another Chinese E-commerce site and direct rival to Tmall (from Alibaba). JD also has an English version that is available in English, Joybuy.com, which ships to more than 200 countries.
  • eBay The leader in online C2C selling has grown to provide B2C sales. With regards to visits, it just isn’t able to compete with Amazon and is responsible for around 20% of market share.
  • Flipkart is the most popular online retail store located in India established in 2007. In the year 2018, Walmart acquired 77% of the shares owned by Flipkart. Today, there are greater than 100 million users who have registered on the site;
  • Rakuten: Japanese E-commerce firm, which controls more than fourteen% of the global online retail market. It has also bought other businesses around the world to boost its presence on the internet;
  • Newegg the world’s leading company in the sale of electronics (computers TVs, computers phones, etc.) Take into consideration this as Amazon’s most sought-after segment.

Amazon’s SWOT Analysis

Below, you will find an in-depth SWOT review from Amazon:

Amazon’s Strengths

  • Brand as an online retailer, Amazon has a strong image of its brand in the marketplace and is the second-highest value of brand just behind Apple;
  • Customer-oriented reasonable pricing, individualized suggestions and reviews create an enduring consumer community
  • innovation: Amazon is always making new products and services , while making improvements to its business operations;
  • Cost Since Amazon does not have physical stores and has a small inventory and inventory, it can maintain a low-cost structure which allows for low margins.
  • Large variety The company is the owner of an extensive range of products that allows customers to purchase everything they want on one platform;
  • Partners The number of Partners is two billion products accessible from third-party sellers. Additionally, Amazon makes partnerships with local supply chain companies to comprehend and satisfy the needs of each country’s local population.
  • Logistics: Amazon uses a extremely efficient distribution system and is renowned for its quick and reliable delivery times.

Amazon’s Weaknesses

  • Business model that can be copied Retail businesses that are online have become increasingly popular and Amazon is facing tough competition.
  • Failures and flops the Fire Phone was a big fail, and the Kindle Fire did not grow as anticipated;
  • Conditions of work The workplace has seen some negative stories concerning the treatment of employees which has impacted the company’s reputation.
  • dependence on distribution companies The issue opens Amazon to a variety of problems, especially when it comes to the negotiation of the terms.

Amazon’s Opportunities

  • Extension: Amazon can expand its operations into developing countries;
  • physical stores The presence of brick and mortar stores might attract customers and be more competitive against box stores;
  • Acquisitions: Amazon has made several major purchases, including Zappos. These acquisitions could increase market share while reducing competition.

Amazon’s Threats

  • Regulations Certain regulations of the government could affect Amazon distribution in certain countries.
  • Exploitative labour: Amazon faced scrutiny from the U.S. for allegedly maintaining relations with organizations that have been implicated in human rights violations.
  • Cybercrime The threat it poses to your security as well as its users.
  • Competition in addition to the big retail corporations, Amazon also faces strong rivals in the field of video streaming like Netflix, Apple TV+, HBO Max, Hulu, Disney+, etc. ;
  • Recession The online stores aren’t immune to economic downturns, and uncertainties can affect Amazon’s sales
  • False reviews People rely on reviews to purchase products The company has already taken down hundreds of fake reviews from its website.

Conclusion

It is said the fact that Amazon is the most prominent player in the market of today which is globally, digital, and always growing. It is a highly productive company that can adapt to the changing needs of customers quickly, efficiently and unique manner. This is why, at present even though it is facing competitors on every front in its own way the umbrella of its corporate operations remains unmatched and should remain at the top in the years to come.

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