Amazon Business Model: The E-commerce Giant

Amazon currently sits at the throne of ecommerce. A business that started in the garage of Jeff Bezos is now worth over $110 billion. Jeff started selling books online when he started his venture. Now, Amazon has expanded its operations into many sectors. From online retail to streaming services, Amazon does it all. Today, we are going to tell you how Jeff Bezos made billions of dollars with the Amazon business model.

Amazon is the largest online retail store. You can find all kinds of products on this e-commerce platform. However, the expansions made by Amazon means that it is no longer just an online retail store. Amazon Prime Video is a video on demand streaming service developed and ran by Amazon. Moreover, Amazon Web Services is the subsidiary of Amazon that deals in cloud computing services.

Jeff Bezos played his cards smartly when Amazon took off. While his entire net worth is largely estimated from his shares in Amazon, he also invests in real estate throughout the USA. Also, he owns a space exploration company that is known as Blue Origin.

His different ventures and expansions in Amazon has helped him to become the richest person in the world. The Amazon business model is complex but we will talk about the crucial aspects that contribute to the wealth of Jeff Bezos.

The Amazon Business Model in a Nutshell

Over the years since its start, Amazon has transformed into an ecosystem. The online e-commerce platform expanded and Jeff Bezos tried his luck in different sectors. In most cases, Jeff found success with his ventures.

Amazon’s revenue model is well-planned and extensive. While amazon.com is the largest contributor to the business model, there are many services powered by Amazon that generate revenue.

The business model of this e-commerce giant is huge. To put that into perspective, we have included the platforms through which Amazon makes money.

Amazon Revenue Sources

Amazon Marketplace – It is the largest source of revenue. Amazon generates revenue through commissions and other fees from sellers.

Amazon Books – Amazon started out as an online book store. They are still true to their roots. The Seattle-based company makes money by selling books through the marketplace, book depository, and AbeBooks. Moreover, it sells comics through ComiXology. Audible is the Amazon subsidiary that sells audio books. Amazon also publishes books. Furthermore, Amazon has developed a dedicated tablet called the Kindle for reading e-books. It is a tablet that is built to provide the closest possible experience of reading a physical book on a tablet.

Amazon Prime Video and Music – Amazon has millions of songs and playlists available that can be streamed from its music streaming service. Also, Amazon Prime Video is their digital streaming service that offers videos on demand. Both of these services help Jeff rake in lots of money.

The Fire Product Range of Amazon – This is an entire range of hardware that consists of smartphones, tablets, TV, mobile OS, and TV sticks etc.

amazon business model
Amazon Echo

Amazon Prime – Amazon has reserved premium services for its customers under the Prime banner. To get free two day shipping and access to various other resources, you can get Amazon Prime. To avail this service, you need to pay $119 per year or $12.99 per month.

Patents by Amazon – Amazon has more than 1000 patents under their belt. Companies pay Amazon to use these patents.

Amazon, Facebook, Apple and Google are known as the Big Four in the tech world. Read about WhatsApp’s business model over here.

The Amazon Marketplace

amazon business model

The amazon.com is the largest e-commerce platform. This e-commerce platform is used to sell Amazon products and third-party products. Third parties pay commissions too Amazon for every sale. Moreover, there are other charges levied on sellers as well.

Amazon is famous for its customer centric services. Their obsession to be the best in the business has made them the first choice when it comes to e-commerce. Moreover, they are also the first choice of many sellers due to its large customer base and perks.

Amazon offers two options to sellers. They are ‘Fulfilled by Merchant’ and ‘Fulfilled by Amazon’. Orders that are fulfilled by merchants mean that the third party is responsible for the logistics of your order. Orders that are fulfilled that by Amazon are kept in Amazon storage centers. These orders are then shipped from these warehouses and Amazon takes care of the logistics. Amazon charges the seller for fulfilling the orders.

The commission fee levied on third party sellers depends on the type of good that is sold.

Amazon Books Play Vital Role In Amazon Business Model

While Amazon first started out as a platform to sell books, the business has now expanded. However, the company still makes money from sales of books. You can buy different books from their marketplace as well.   

The audio books are sold on the digital store Audible, an Amazon subsidiary. It sells audio books, podcasts, radio and TV programs, and audio magazines and newspapers.

Goodreads.com is famous for being a hotspot for book recommendations. It is also owned by Amazon. This website generates revenue by hosting advertisements and affiliate sales.

The Kindle and the Kindle store make great money for Amazon. Kindle is the most famous e-book readers available in the market.

amazon business model
Amazon Kindle

Amazon Business Model includes Music and Video too

IMDB and Twitch are subsidiaries of Amazon as well. Amazon acquired IMDB in 1998. The advertisements on IMDB generates revenue. Twitch is one of the biggest streaming platform for gamers. Paid memberships and ad placements help to generate revenue for Twitch.

Amazon Music streaming service has millions of songs and playlists available. These can be accessed by paying for a membership fee that is billed monthly or yearly.

Amazon Prime Video is the video-on-demand service that provides digital streaming of different movies and videos.

Amazon Web Services

AWS provides cloud computing solutions worldwide. They currently lead the way in many cloud computing services. Amazon charges its customers for the services they offer.

Conclusion

Amazon makes money from different sources. Amazon as a business has expanded and has operations in various sectors. Notably, the Amazon marketplace, Amazon books, Amazon Prime, Amazon Music, Amazon Prime Video and Amazon Web Services etc. help in generation of revenue. They make money through commissions, subscriptions, advertisements, logistics and selling of Amazon products.

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