Amazon Business Model (Everything You Always Wanted to Know)

Amazon is the largest global technology company focusing on eCommerce, cloud computing, digital streaming, and artificial intelligence. From its revenue and market capitalization to its total sales and geographic availability, Amazon offers services to multiple industries. To understand Amazon's business model, you'll have to learn how it operates and what it does to remain on top.

In this article, you'll gain an understanding of the business model used by this innovative company.

Table Of Contents

What is Amazon's Business Model?

Amazon has a diversified customer-focused business model that incorporates various units. It includes a one-sided platform, a two-sided marketplace, web services, a kindle marketplace, an app store, prime video, a game studio, and even Amazon Go retail stores. Thanks to its diverse ventures, Amazon has grown to become one of the largest companies in the world.

While Amazon offers a wide range of services, its core business model is based on its eCommerce market platform.

Amazon's Key Partners

The major key partners who have contributed to the success of Amazon include:

Sellers: These are Amazon's most important partners who use the platform to sell their products and generate the most revenue for Amazon. Amazon has partnered with many third-party sellers offering a wide variety of products.
Affiliates: Bloggers who earn commissions through referrals that lead to sales
Developers: Partners of the AWS segment
Content creators: Include authors or publishers who publish their work on the platform
Subsidiaries: These include transport partners, tech partners, and companies that provide storage spaces, stores, and systems
Buyers: Millions of people across the world who get products and services through Amazon's channels

Amazon's Value Propositions

Amazon's business model is based on three key value propositions: low prices, the widest range of products, and convenience.

Low prices: Amazon offers its products at the lowest price possible without compromising quality. It does this by leveraging technology.
Widest selection: Amazon provides a reliable and well-stocked platform for shopping with a wide selection of products, from books to music and videos.
Convenience: With the help of a device connected to the internet, Amazon customers can easily access their services, including its extensive product catalog and fast delivery services.

What are Amazon's Revenue Streams?

Having one of the most effective business models, Amazon has a wide range of revenue sources. A large percentage of Amazon's revenue comes from the sales of products on its eCommerce platform. It also charges a listing fee from third-party sellers who would like to list their products on its platform.

Amazon also derives a considerable amount of its revenue from its Amazon Prime subscriptions and advertising. Its seller program allows it to make money from commissions on sales, transaction fees, and per-unit activity fees.

To cater to startups and developers, Amazon offers them AWS services that include database, and storage features, among other services. Other sources of Amazon's revenue include the Kindle marketplace, affiliate programs, Fulfilled by Amazon charges, licenses, and patents.

Generally, Amazon has a dynamic revenue model and repeatedly ventures into newer areas.

Amazon's Customer Relationships

Amazon has always been a customer-centric company that focuses on maintaining healthy and long-lasting relationships with its customers. It uses various strategies to enhance its customer's shopping experience by offering convenience, low prices, and various communication channels. Amazon has managed to retain its customers for a long period by offering:

An easy-to-use interface: Users can effortlessly use and understand the platform's user interface. It has high-quality images, accurate descriptions, and an easy checkout process, making shopping on the platform much more straightforward.
Recommendations: Products are recommended to customers based on their previous shopping patterns
Customer support: While Amazon strives to deliver the best customer experience, it has an efficient customer support system offering 24/7 support to anyone who faces a problem, has inquiries, or gets stuck.
Review system: Amazon's online review system allows customers to share their opinions and experiences on the platform. This helps it maintain high-quality standards in its marketplace.

What is Amazon's Key Resources

There are various key resources that Amazon uses to keep its business up and running. One of its significant resources is its technological infrastructure. This includes its website, apps, and the developers who maintain and expand on it. Amazon's technological infrastructure should be secure and operational without any interruptions that could lead to losses.

Other essential resources include its warehouses and fulfillment centers used for product packaging, shipment and delivery, supply chain structure, and company executives in various departments.

What is Amazon's Key Activities

Amazon mainly focuses on developing, maintaining, and expanding its platform. It majorly invests in the following activities:

Developing, designing, and optimizing its platform (website and apps)
Managing its supply chain and logistics
Secure and build a partnership with its supplier and sellers
Merchandising of its digital and physical goods.
Production of films, services, and other products for its Prime video platform
Marketing all of its products and services
Acquiring new ventures to support its ecosystem

What are Amazon's Channels

Amazon uses various efficient channels to deliver its services. Its largest and most important channel is the Amazon website, which has different versions to cater to its worldwide customers. Other important channels include the brand's app, available on both PlayStore and App Store, Amazon Affiliate program, and Amazon Prime, which is Amazon's streaming, entertainment, and subscription platform.

Even though Amazon is majorly an internet-based company, it also has Amazon Go, which are physical stores that use technology to provide an easier and faster shopping experience. It also includes various transport and delivery channels to ensure products reach their customers.

Amazon's Cost Structure

Amazon's cost structure is based on a system that benefits them by improving the customer's experience. Therefore, it dedicates most of its expenses to improving the various aspects of its business operations. Amazon's cost structure includes its:

IT structure
Customer service centers
Software development and maintenance
Information security
Marketing
Expenses are used to maintain its physical spaces, including fulfillment and sortation centers.

Conclusion

Thanks to its diversified business model, Amazon is among the most valuable global brands. From its eCommerce platform selling a wide range of products to its fulfillment services, Amazon Prime, Amazon AWS, and Amazon advertising, Amazon has managed to operate seamlessly on a global scale. It mainly operates on the business model of a two-sided marketplace by providing a platform for buyers and sellers to interact and trade with each other.

Generally, Amazon is a customer-oriented company that provides immense value to its customers through its diverse services and products, easy-to-use platforms, and seamless operations that ensure customer satisfaction.