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Amazon Case Analysis

Amazon has a diversified business model consisting of multiple revenue streams: 1) Over 50% of revenues come from their online stores. 2) Other revenue sources include physical stores, Amazon Web Services, subscription services like Prime, seller services, and advertising. 3) Amazon Prime is a critical part of their growth strategy, as it increases customer loyalty and spending on the platform. They now have over 150 million Prime subscribers.

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sagar vazirani
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170 views

Amazon Case Analysis

Amazon has a diversified business model consisting of multiple revenue streams: 1) Over 50% of revenues come from their online stores. 2) Other revenue sources include physical stores, Amazon Web Services, subscription services like Prime, seller services, and advertising. 3) Amazon Prime is a critical part of their growth strategy, as it increases customer loyalty and spending on the platform. They now have over 150 million Prime subscribers.

Uploaded by

sagar vazirani
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Contents

Specific Sector Analysis........................................................................................................................3


Third Party Sellers at Amazon MarketPlace.......................................................................................3
Amazon Prime...................................................................................................................................4
Amazon AWS.....................................................................................................................................5
Amazon advertising business.............................................................................................................6
Amazon business model today..............................................................................................................7
Basic Introduction

Amazon has a diversified business model. In 2019 Amazon posted over $280 billion in revenues and
over $11.5 billion in net profits. Online stores contributed to over 50% of Amazon revenues, followed
by Physical Stores, Amazon AWS, Subscription Services, Third-party Seller Services, and Advertising
revenues.

Started in 1994 as a bookstore, Amazon soon expanded and became the everything store. While the
company core business model is based on its online store. Amazon launched its physical stores, which
generated already over five billion dollars in revenues in 2017.
Amazon Prime (a subscription service) also plays a crucial role in Amazon’s overall business model,
as it makes customers spend more and being more loyal to the platform. Besides, the company also
has its cloud infrastructure called AWS, which is a world leader and a business with high margins.
Amazon also has an advertising business worth a few billion dollars. Thus, the Amazon business
model mix looks like many companies in one. Amazon measures its success via a customer
experience obsession, lowering prices, stable tech infrastructure, and free cash flow generation.
Specific Sector Analysis

Third Party Sellers at Amazon MarketPlace

 Amazon offers programs that enable sellers o grow their businesses, sell their products on our
websites and their own branded websites, and fulfill orders through us
 Also, another thing which has worked for Amazon is the fact that Amazon does not act as a
seller of record in these transactions.
 Amazon collaborates with developers and enterprises of all sizes, including start-ups,
government agencies, and academic institutions, through their AWS segment, which offers a
broad set of global compute, storage, database, and other service offerings.
 Amazon also serves authors and independent publishers with Kindle Direct Publishing, an
online service that lets independent authors and publishers choose a 70% royalty option and
make their books available in the Kindle Store, along with Amazon’s own publishing arm,
Amazon Publishing. 
Amazon Prime

 Amazon released its fourth quarter earnings for 2019  in Jan 2020, and the company is
touting big Prime subscriber numbers as one of the main contributors to a very
successful holiday season. The company says it now has over 150 million Prime
subscribers, and that more people joined Prime during the fourth quarter of last year than
any other quarter in the company’s history. Since its last milestone of 100 million
subscribers in 2018, more than 50 million people have joined.
 Amazon Prime is a critical element of Amazon’s growth strategy. The logic is simple, the
more people join the Prime Memberships, the more products they purchase on the online
stores.
 Indeed, with Prime, members enjoy faster delivery services besides the access to
Amazon’s original content offered via streaming. This subscription model also creates a
more stable and predictable income over time.
 Amazon Prime can be considered to be one of the most successful business plans for
Amazon
Amazon AWS

 As of 2017, AWS owns a dominant 34% of all cloud (IaaS, PaaS) while the next three
competitors Microsoft, Google, and IBM have 11%, 8%, 6% respectively according to
Synergy Group.
 Started as an experiment back in 2000, the Amazon AWS has grown to become an over
seventeen billion dollars business in 2017. AWS also enjoys higher margins and network
effects.
 With the future moving towards a more highly cloud managed business system, AWS
could peak at the right time and that might be a great revenue boost for Amazon.
Amazon advertising business

 Amazon more than doubled its advertising revenues from the first nine months of 2017,
compared to 2018. Indeed, the revenues went from $2.92 billion in 2018 to $6.72 billion
in 2018.
 Compared to Facebook $38.37 billion and Google $83.68 billion for the same period,
Amazon is still a small player. However, if we take into account that Amazon runs a
diversified business model, with several revenue streams, it also gives the company more
space to experiment with advertising!
 A majority of the others segment revenue comes from Advertisement
Amazon business model today
 In Q1 2020, Amazon’s net sales increased by 26.3%. Yet its operating income decreased
by 9.7% primarily due to a higher cost of sales (30% increase), incurred by Amazon due
to the COVID, due to increased shipping and fulfillment costs and marketing expenses.
 Throughout the COVID pandemic, Amazon recorded a substantial increase in revenues
that also resulted in more cash from operating activities (Amazon has positive cash
conversion cycles). However, cash was spent from operations to expand shipping and
fulfillment. And from investing activities in increasing the capability of the Amazon tech
platform (AWS).

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