Saturday, June 15, 2024

    How Does Amazon Make Money? The Amazon Business Model Explained! – is easily the world’s largest (by a fair distance) and the most dominant internet retailer, that sells almost anything – from books and DVDs to baby products and women’s apparel, from toys and sports equipment to home and garden tools, from shoes and jewelry to flat-screen TVs and personal computers.

    There really are very few things under the sun that Amazon does not sell, and it’s incredible that Amazon manages to sell them at such affordable rates. Amazon rightly claims to be the “Earth’s Biggest Selection” of products, and or rather, the Wal-Mart of the World Wide Web. We discuss the phenomenal success of Amazon, and try to identify the reasons behind this, as well as provide an analysis of the Amazon business model.

    Stunning Success

    Started by a former child prodigy turned Hedge Fund executive turned internet entrepreneur, Jeff Bezos, around 20 years ago, Amazon was mainly a seller of books on the internet in the beginning. It slowly grew from that to being a seller of music and DVDs, to selling electronics, till it has finally emerged as the seller of most things made on Planet Earth.

    With annual sales of an extraordinary $107.42 Billion for the year 2015, and an awe-inspiring market cap of $261.05 Billion at the time of this writing, Amazon, needless to say, has been a phenomenal success story. The key to Amazon’s success lies in both the visionary leadership of its great founder and Chief Executive, Jeff Bezos, and its amazing business model, which we shall analyze next.

    Amazon’s Business Model

    The Amazon Business Model is notable for its diverse lines of business. From the traditional model of online retail, which Amazon has perfected more than any company in history, to a new, highly successful Kindle e-book ecosystem, as well as offering Cloud services to other businesses, Amazon does it all. Let’s look at what makes Amazon’s online retail line of business so special, as well as the Kindle Ecosystem, and Amazon Web Services.

    1. Amazon’s Online Retail

    As discussed earlier, Amazon sells an incredible collection of products on the Internet, and does so at very low prices. As a retailer, Amazon may either stock the products to be sold in its huge, technologically highly advanced and efficient warehouses, or just act as an online marketplace, connecting buyers to sellers, just the way Ebay does, without taking the inventory in its hands. Amazon carries out both strategies to perfection. Amazon has also perfected the system of delivery, stunning customers by delivering the items ordered by them, in very little time after the placing of the order, often in less than a day’s time. The vast selection of products, the amazingly low prices, the stunning speed of delivery, and assured quality – all these factors make Amazon every customer’s first choice for buying items on the internet.

    2. Kindle e-book Ecosystem

    Amazon has converted a huge number of its book collection into an e-book version, called Kindle e-books, which may be read on specially created e-book readers called the Kindle. This is fast turning into yet another Amazon stunning success story, with Kindle e-books having already outsold paperback and hardcover books for the past year.

    3. Amazon’s Other Internet Services

    Amazon Prime is a service given by Amazon, using which the customer may avail of a free 2-day shipping, as well as watch movies and TV shows on her tablet, on demand.

    Amazon Web Services is the Cloud service offered by Amazon to several businesses, small and large, using which the businesses can make use of Amazon’s huge server farms, for their own purposes. This is profitable both for these businesses, as well as for Amazon.


    Raghav Hegde
    Raghav Hegde
    I am a freelance ERP consultant based in Bangalore, India, and double up as a freelance writer in my spare time. My specialties include writing on technology, finance and politics. There is nothing I love more than reviewing the hottest tech products, and I hope to share my love of technology with you, the readers of Geekers Magazine, to inform, educate and entertain. I like constructive criticism, so if you guys have any advice or suggestions for me, I really would appreciate that. Ciao! Raghav Hegde, Bangalore

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