Amazon

Business
Model

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 SUPER GUIDE:
Amazon
Business
Model

BY DANIEL PEREIRA

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 © THE BUSINESS MODEL ANALYST

The Business Model Analyst is a website dedicated to

analyzing business model types, patterns, and innovations
using the business model canvas as its primary tool. The
site offers a wide variety of free and premium content,
including digital products such as PDF tools, presentations,
spreadsheets, ebooks & guides, and much more. Check it
out here.

Daniel Pereira
The Business Model
Analyst Ottawa, ON,
Canada
businessmodelanalyst.com

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 Copyright © 2022 Daniel Pereira
All rights reserved.
ISBN: 978-1-998892-35-8

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 TABLE OF CONTENTS
Introduction 11

A Brief History Of Amazon? 13

Four Key Waves 14
1994-2005 14
2005-2015 15
2015-2020 15
2020-Forward 16

Who Owns Amazon 17

Amazon’s Business Model 18

Amazon's Vs. Alibaba's Business Models 20
Different Amazon Business Models 21
Retail Arbitrage 21
Pros Of Retail Arbitrage 22
Cons Of Retail Arbitrage 23
Online Arbitrage 24
Wholesale 25
Pros Of Wholesale 26
Cons Of Wholesale 26
Private Label 27
Drop-Shipping 28
Handmade 29

Amazon’s Business Model Canvas 31

Amazon’s Customer Segments 31
Sellers: 31
Developers 32
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 Buyers 32
Amazon’s Value Propositions 32
Low Price 34
Fast Delivery 34
Large Choice Of Products 35
Amazon’s Channels 35
Amazon’s Customer Relationships 36
Amazon’s Revenue Streams 37
Amazon’s Key Resources 38
Amazon’s Key Activities 40
Amazon’s Key Partners 41
Sellers 41
Affiliates 42
Developers 42
Content Creators 42
Subsidiaries 42
Amazon’s Cost Structure 43

How Does Amazon’s Business Work? 44

Consumers 45
Sellers 46
Developers And Enterprises 46
Content Creators 47

How Amazon Makes Money 49

Amazon Marketplace 50
Amazon Prime 51
Amazon Web Services 52
Amazon Kindle 52
Amazon Patents 53
Amazon Advertising 53

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 Amazon's Revenue Model 54
Amazon’s Cash Machine 55
Amazon's Advertising Business 57
Amazon Prime 58
Amazon Aws 59

The Amazon Fba Business Model 61

What Is Fba? 62
Examples Of Amazon Fba Listings 62
How Does Amazon Fba Work 63
Benefit From Amazon Prime 63
Benefit From Amazon Affiliates 63
Not Limited To Listing On Amazon 63

The Cons Of The Amazon Fba Model 64

Upfront Capital 64
Choosing A Supplier 64
Dealing With Suppliers 64
Amazon Only Promotes Successful Products 65
Reliant On Amazon 65
Own Online Store Could Be More Profitable 65

What Buyer Persona Best Fits The Amazon Fba Business

Model? 66
Portfolio Paul 66
Diy Dave 66
Flipper Fred 66
Strategic Sally 67
Growth Strategies 67
Paid Traffic 67
Build A Brand 67

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 Build An Email List 67
Social Media 68

Amazon's Business Strategy 69

Amazon Employs A Long-Term Approach. 69
Strengthening Amazon Ecosystem 70
Uncompromised Focus On Customer Service 70
Focusing On Amazon's Leadership Values 71
Focuses On The Long Term, Not The Short Term 71
Strategy On Things That Don't Change 71
Opportunities And Not Failures 71
Strong Values & Culture 72
Competitive Prices 72
Focusing On Seo & Ppc 73
Diversified Patent Portfolio 73
Investment In Different Technologies 73
Amazon In Entertainment Sector 73
Becoming A Logistics Powerhouse 74
What Has Amazon Been Successful In? 74
Statistics On Amazon's Leadership 75
How Does Amazon Respond To Competition? 75
How Does Amazon Position Its Brand? 76
How Does Amazon Maintain Leadership? 76
Product Selection 76
Offering Various Features And Services 77
Continually Improves The Customer Experience 77
How Does Amazon Respond To Failures And Setbacks? 78
Amazon Acquisition Strategy 79

What Makes Amazon’s Business Model Unique: The Pricing

Strategies 80
Dynamic Pricing 81
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 Psychological Pricing 81
Competition Monitoring And Repricing 82

Amazon's Virtuous Cycle 83

Understanding Amazon’s Financial Model 85

Amazon’s Digital Distribution 87

Amazon’s Competitors 90
Online Stores 90
Walmart 90
Alibaba 91
Otto 91
Jingdong (J.D.) 91
Ebay 92
Flipkart 92
Rakuten 92
Newegg 93

Amazon’s Swot Analysis 94

Amazon's Strengths 94
Brand 94
Customer Orientation 95
Innovation 95
Cost 95
Large Selection 95
Partners 96
Logistics 96
Amazon’s Weaknesses 96
Imitable Business Model 96
Flops And Failures 96
Workplace Conditions 97

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 Dependence On Distributors 97
Amazon's Opportunities 97
Expansion 97
Physical Stores 97
Acquisitions 98
Amazon's Threats 98
Regulations 98
Exploitative Labor 98
Cybercrime 98
Competition 99
Recession 99
Fake Reviews 99

The Organizational Structure Of Amazon 100

Conclusion 103

References 104

About The Author 106

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 INTRODUCTION
There are over 26 million e-commerce sites across the entire
globe, with more being created every single day. However,
none of them are as iconic and revered as the technological
merger company, Amazon.

The technological e-commerce giant is undoubtedly the

largest online marketplace in the world. The company caters
to about 8 million retailers, businesses, and entrepreneurs. It
ships out about 1.6 million packages daily, roughly equivalent
to 18.5 packets per second.

It is the largest e-commerce platform in the U.S. and is worth

more than the next 14 businesses combined. The company is
worth about $1.04 trillion and has been around for only 28
years.

It was founded by Jeff Bezos, who, according to Forbes

magazine, is the 4th richest man in the world. The company is
in 20 countries across five continents, including the United
States, France, Italy, the United Kingdom, Turkey, India, Saudi
Arabia, Japan, Singapore, Mexico, Australia, Colombia,
Poland, and Brazil. Its current CEO is Andy Jassy.

It is frequently referred to as the "everything store." The

company is increasingly evolving from being a retail company
into a platform with the same business model as the likes of
Google, Facebook, Apple, and Microsoft. Collectively referred
to by the acronym GAFAM, the profits of these top-five tech
companies have shaped and molded the world as a whole,
while subsequently shaking the foundations of the business
sector.

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 The company is often thought to be only an e-commerce
platform that helps connect sellers and buyers and acts as a
middleman. However, the truth can be no further from this as
the company has branches deeply rooted in computing and
data processing, entertainment, Patents, book publication,
and many more. Each of the many segments of the company
works simultaneously and in tandem to create a vast,
technologically advanced business empire.

But the question is, how does Amazon make money? And
what business strategy does it employ to attain success? In
this in-depth analysis of Amazon’s business model, we will
share with you everything you need to know about the
company.

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 A BRIEF HISTORY OF
AMAZON?

Amazon is one of the largest multinational technology

companies on the planet. The company focuses on
e-commerce, cloud computing, online advertising, digital
streaming, and artificial intelligence.

Often referred to as "one of the most influential economic

and cultural forces in the world". The company is one of the
world's most valuable brands.

The company stands as one of the Big Five American

information technology companies, among the likes of
Alphabet, Apple, Meta, and Microsoft.

Formerly known as Cadabra between 1994 and 1995, the

company was founded by a former Wall Street hedge fund
executive and visionary named Jeff Bezos.

He was fully aware of the business potential created by the

internet during its early years and used this knowledge. He
decided to create an online e-commerce store, which he
intended to name "Cadabra," derived from the popular
magician phrase abracadabra.

However, he would later change the name after he was

advised by his lawyer, Todd Tarbert. Todd argued that the
name was obscure and, when spoken on the phone, sounded
like a word that referred to dead bodies, "Cadaver".

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 Jeff would listen to his lawyer and change the company's
name to Amazon. The company was launched on July 5th,
1994. The online marketplace focused solely on selling
books, as it seemed to Jeff, a logical option.

Against the odds and speculations of the financial journalists

and analysts who predicted Amazon and the Internet as a
failure.

Amazon.com gained 180,000 accounts in its first year. This

success caused the company to expand into multiple product
categories, which helped the company earn its moniker, The
Everything Store.

Four key waves

Amazon's rich history can be broken down into 4 distinct
waves. Each of these waves marks a significant milestone
crossed by the company as it grew to be the giant it is today.

1994-2005
Amazon went public in May 1997. The company had long
since branched out from only selling books and, as of 1998,
had begun selling music, videos, video games, consumer
electronics, home improvement items, software, games, and
toys.

In the same year, it began international operations by

introducing online booksellers from the UK and Germany into
the marketplace.

In 2002, it launched Amazon Web Services (AWS), which

initially focused on providing APIs for Web developers to
build Web applications on top of Amazon's e-commerce
platform.

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 In 2004, AWS was expanded to provide website popularity
statistics and Web crawler data from the Alexa Web
Information Service.

During this period, Amazon also placed investments in

multiple internet startups. However, this startup investment
would deal Amazon a great deal of loss, with the worst being
the bankruptcy of Pets.com, which was one of the vital
investments the company had bet on.

As the early 2000s rolled around, the company changed its

business strategy and cut all investments in companies it did
not directly control. This change led to the company's
transition from an e-commerce company to a platform
business model.

2005-2015
As the mid-2000s came into play, Amazon had set itself up
entirely for a total change in its business model.

The company began experimenting with different programs

and products. Some turned out to be total failures, such as
the Kindle Fire phone, a 3D-enabled smartphone developed
by Amazon[5] and manufactured by Foxconn.

Others, however, turned out to be massive successes and

incredible business segments like the Amazon streaming
platform Amazon Prime Video, its popular cloud service
provider Amazon AWS and its advertisement sector Amazon
Advertisement

2015-2020
By 2015, the company had already proven itself to be a giant
in the tech industry and had begun to compete with the top
players of the time.

During this period, the company focused on expansion in

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 places of interest, such as Europe, Mexico, and India. It also
tried hard to break into China.

Its most outstanding achievement was from the AWS sector,

as the numbers soared high enough to make tech giants like
Google and Microsoft double down on cloud computing and
its technology.

2020-Forward
As the pandemic swept through the world and caused a halt
to most of its economic sectors, Amazon became one of the
companies that made its mark on the world.

The company had created a customer-obsessed business

that focused on bettering itself. So much so that it spent a
substantial amount of money in order to scale its services
further and make them even more compelling to customers.

However, this created tension among other stakeholders,

such as employees, suppliers, and third-party stores.

This tension has led to Amazon being a controversial

company, loved by its loyal customers. During this period, the
company hired 100,000 more staff in the U.S. and Canada.
Some Amazon workers in the U.S., France, and Italy protested
the company's decision to "run normal shifts" despite many
positive COVID-19 cases

However, complaints like this are to be expected as the

company has moved to focus more on customer experience.

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 WHO OWNS AMAZON

As mentioned, Amazon is owned by its billionaire founder,

Jeff Bezos. On July 2, 2021, Amazon announced that Jeff
Bezos would step down as CEO to become executive chair of
Amazon's board in Q3 of 2021. Andy Jassy, previously CEO of
AWS, became Amazon's CEO and president.

Differently from Google x Alphabet and Facebook x Meta

relations, Amazon is the official name of the holding group,
which includes all of its emerging services, such as Amazon
Music, Amazon Prime Video, Kindle and Alexa devices, and
Amazon Web Services (AWS), among many others.

The name "Amazon" was chosen in 1994 by Bezos and his

then-wife, MacKenzie Tuttle. The two had to brainstorm a new
name for the company and settled on Amazon, as it was the
biggest river in the world. It aligned with Bezos' goal to make
his online store similarly vast.

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 AMAZON’S BUSINESS
MODEL

When it comes to the Amazon business model, one will be in

the right place if it is likened to a moving train with many
diverse but crucial parts.
From the outside, the company looks like a collection of
separate companies working together for the common good.
That image is not as farfetched as it may seem.

First and foremost, the company gains some revenue by

selling goods directly to its customers. A good percentage of
goods are offered to Amazon customers with a small markup
through Amazon's online storefront. The inventory of these
storefront goods is kept within the company's extensive
network of warehouses.

Due to the company's reputation, it garners a lot of customers

as they assume goods are cheaper and readily available to
be shipped or delivered.

The company also acts as an online market platform that

allows third-party markets to sell their products to their large
and loyal customer base. Products sold through Amazon's
partner retailers or third-party markets are often less common
items or those with a higher purchase price. This allows
Amazon to avoid holding slow-moving inventory that could
dilute profit.

While Amazon does not charge retailers for listing their

products for sale, the company does collect a small

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 commission from the sales made by the retailers.

The company also sells e-books through its online store,

Amazon Kindle Direct Publishing (KDP), which also gives the
option for third-party sales just like its primary market.

Besides the market, Amazon also generates a small portion

of its revenue from the sales made from a small electronics
product line.

The company runs a subscription-based business model

through its Amazon Prime service. Prime account customers
pay an annual fee to secure free two-day or same-day
shipping on eligible items and have access to streaming
media, such as digital music or movies.

Lastly, the company also has its own cloud infrastructure

called AWS, which is a world leader and a business with high
margins. As well as an advertising business worth a few
billion dollars

As you can see, the business model is a mix of multiple

independent sectors working as a whole. Amazon measures
its success via a customer experience obsession, lowering
prices, stable tech infrastructure, and free cash flow
generation.

Amazon's vs. Alibaba's

Business Models
Since Amazon can be said to be America's largest online
market, Alibaba can also be said to be the Chinese
equivalent of Amazon.

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 Although similar in their goal of building an online community
that facilitates the movement of goods from buyers to sellers
across the globe, the two companies have a few differences
in their business model and how they approach this goal.

Firstly, although the two facilitate the trading of goods online,

Amazon retains a portion of the sales made as a commission
for acting as a middleman between the buyer and seller.

Alibaba, on the other hand, does not charge any commission

on sales or for listings. Instead, the company charges sellers
a specific amount to rank higher on their marketplace's
internal search engine. This generates advertising revenue
for Alibaba.

Secondly, there is no market distinction between large sales

corporations and small business retailers on Amazon. Both
parties can offer their goods to the public on the same
platform.

However, Alibaba has Taobao, the largest market that caters

to small retailers looking to sell their goods. It also has Tmall,
which is an online market owned and operated by Alibaba
that is designed to cater to the needs of larger marketing
corporations like Nike, Apple, and Gap.

Different Amazon Business

Models
Besides the primary business plan followed by Amazon, there
are six overarching business models that third-party markets
or retailers can use to generate revenue for themselves.

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 These business models depend on the kind of goods sold;
none can be considered right or wrong. Rather, each has its
own specific pros and cons regarding how they generate
revenue for the retailers.

Retail arbitrage
Retail arbitrage is an easy business model favored by those in
search of an entry-level business model. This business model
focuses on hunting for goods at lower prices or collector's
editions of goods in brick-and-mortar retail stores and selling
them online at a higher price than initially purchased.

The business model allows sellers to benefit from panic

buyers and products in high demand by bulk buying items at
a reduced price and raising the cost to sell on Amazon.

The simple concept behind retail arbitrage is easy enough to

be repeated long enough to create a significant source of
revenue while actively building up an inventory and
discovering which product lines provide the most sales
opportunities.

In order to calculate your profit from this business model, the

retailer must calculate the price at which the goods were
bought and sold and deduct the standard Amazon fee.
Whatever is left can be counted as profit.

Before posting a price for a particular item, it is also important

to note. The retailer should investigate the price at which the
item was valued by the same market competitors. This is to
help sell the item quickly, as an overpriced item is often bad
for business.

Pros of retail arbitrage

As one of the simplest and cheapest Amazon retail business

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 models, retail arbitrage has many advantages as a business
model.

● Budget independence: retail arbitrage allows retailers

to dictate how much they would spend on buying
products and running the business model as a whole.
This is especially great for those with low income or a
tight budget, as it allows them to start a business with
as much money as they can spare.

According to studies, 49% of retail arbitrage sellers

start selling on Amazon for less than $1,000.

● Easy growth: besides the independence of budget,

the retail arbitrage business model also creates a
simple and efficient way for the new business owner to
grow their business. This is because You get to
maintain complete control over your inventory
regarding the quality of your products, allowing you to
quickly determine reasonable prices and make sure
you buy the right volume of stock.

There are several methods to generate an inventory

that doesn’t require a significant investment but is still
of high value, such as visiting stores due to close
down or those with regular sales to reduce their stock.

According to a study, 41% of retail arbitrage sellers

claim that it takes six weeks or fewer to get started
selling, making it one of the fastest Amazon business
models when it comes to getting up and running.

● Easy business governance: AN often overlooked

advantage of the retail arbitrage business model is the
ease of making business decisions. A business owner
can easily change tactics and goods, as it is as easy as
implementing any preconceived ideas or notions. For

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 example, changing the goods sold is as easy as
changing the goods bought and has no additional
process that complicates the change

Cons of retail arbitrage

Although it is one of the most popular and cheapest business
models, the retail arbitrage business model also has some
disadvantages.

● Low profit and gains: although the retail arbitrage

business model offers an exceptional level of ease and
affordability, the business model struggles in
profit-making. This business model is not advisable for
those hoping to generate a large amount of revenue
within a short period of time.

According to studies, 62% of retail arbitrage sellers

earn less than $5,000 per month on Amazon, and 25%
make less than $500. 48% of all retailers using this
business model have a profit margin of less than 20%
on their products.

● Time-consuming: aside from turning out less than

stellar profits, the retail arbitrage business model also
consumes a lot of time as it requires a lot of product
and customer research as well as driving around in
search of goods.

According to a study, 60% of retail arbitrage sellers

spend up to 20 hours per week working on their
business, and 25% spend less than four hours each
week. That includes looking for products, building
listings, and shipping goods.

Besides researching and looking for goods, retailers

also spend a lot of time monitoring and managing
expenses, revenue, and other financial metrics. They

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 also spend time finding a supplier and optimizing
product listings.

If you have a full-time job and are looking for an

Amazon business model to act as a secondary form of
passive income, there may be other viable options

Online arbitrage
With e-commerce quickly becoming the preferred method of
shopping in the world, online arbitrage stands to leverage its
popularity to turn a profit.

This business model involves scouring the internet, buying

reduced or cheap products from e-commerce marketplaces,
and selling them for a higher price on Amazon.

Like in retail arbitrage, the profits online arbitrage sellers on

Amazon earn are the difference between the price they can
sell the product minus Amazon's fees and the product's
original cost.

The business, however, is more superficial than retail

arbitrage as it eliminates the need for drivers to drive around
to brick-and-mortar stores and allows retailers to directly
compare the prices of goods on Amazon before buying them.

This Amazon business model allows the retailer to work

remotely and flexibly while leveraging the endless supply of
e-commerce sites that emerge daily.

Besides the e-commerce advantage on the online arbitrage

side, there is little to no difference in its pros and cons
compared to retail arbitrage, except for increased
convenience and more straightforward research methods.

Wholesale
This business model entails retailers purchasing low-cost or

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 discounted bulk quantities of goods from suppliers and
reselling them on Amazon at a higher price.

More often than not, wholesale products already have listings

created on Amazon. This business model allows retailers and
third-party markets to buy high-valued goods cheaply from
suppliers as they are purchased in bulk. This then translates
to a higher profit margin in every retailer's sales.

However, this business model requires deep research for

individuals who are new to it. This is because there is a
minimum order you have to place with suppliers. New
retailers will need to do plenty of deep research into sales
history and customer preferences to understand the demand
for each product they consider stocking.

Pros of wholesale
The wholesale business model has a lot of advantages under
its belt. It is one of the most stable business models.

● Steady growth and safe experimentation: one of the

most attractive features of the wholesale business
model is the prospect of guaranteed and steady
business growth.

Once a retailer has researched and chosen the goods

they want to sell, they can stick to that one product
and gain a reasonable profit as they slowly branch out
and experiment with new interests.

According to a study, 61% of wholesalers earn more

than $5,000 a month selling on Amazon. 58% of
wholesalers have profit margins of less than 20%.

● Easy to run: the wholesale business model is also

relatively easy. This is because, after the appropriate

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 research and findings, the retailers can keep ordering
the selected smaller number of profitable products in
bulk rather than dedicating hours to stock
management and replenishment for a range of
individual products.

Cons of wholesale
Although the wholesale business model is one of the most
stable and has a large profit margin, the business model also
has some disadvantages to its adoption.

● Extensive research: rushing into the wholesale

business model is a surefire way to rack up a loss and
debt. The business model requires extensive research
on the products of interest and how they affect
customer preferences and needs.

According to research, nearly half of wholesalers (49%)

spend over 20 hours on their businesses each week,
and 18% spend over 40 hours each week.

This research is not only essential, but also a necessity

for the business to run smoothly.

● Expensive to set up: due to its nature, the wholesale

business model requires a large sum of money for
initial investment. This, however, may turn out to be a
huge success and garner good profit or be a
spectacular loss right out the bat or down the line due
to a lack of experience or resources. This loss may
also lead to debt if not managed well. This is why,
before investing, the retailer must extensively research
the product they intend to buy.

According to a study, 47% of wholesalers spent less

than $2,500 to get started selling on Amazon.

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 Private label
This business model is most suitable for popular businesses
or brands. The private label business model leverages the
reputation and popularity of a business or brand.

The business model involves purchasing, rebranding, and

repackaging unbranded manufactured goods from a separate
manufacturer. The rebranded goods are then sold at a higher
price by the businesses as their own.

As most retailers have to build their reputation from scratch,

this business model requires a basic understanding of
branding, marketing, and optimization if a retailer wants to
build a brand reputation and a name for themselves.

The success of a business depends entirely on its reputation.

It also eliminates the risk of the effect of other businesses'
strategies and reputations on the retailer's business.
However, this is a double-edged blade, as the retailer can not
rely on other businesses' images to help increase sales or
profits.

Jungle Scout's 2021 Amazon seller survey shows this is the

most popular Amazon business model, with 67% of sellers
saying they used this method to sell on the platform. Often
considered the most expensive, according to the same study,
On average, 61% of private-label sellers spend $2,500 or
more to get started.

However, the profits are worth the amount of money spent on

investment. With 56% of private label sellers making $5,000
or more in monthly sales and 35% of private label sellers
realizing a profit within the first six months of selling on
Amazon,

The business model is relatively slower than other Amazon

business models, with 48% of private label sellers having their

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 businesses up and running in three months or less.

However, it takes about the same amount of time or less to

run as most Amazon business models, with 58% of private
label sellers spending less than 20 hours per week on their
business and 15% of private label sellers spending less than
four hours.

Even Amazon has its own private-label products named

Amazon Essentials and AmazonBasics.

Drop-shipping
This business model is preferable for business owners who
prefer using Amazon as a passive income source. This model
exonerates the retailer entirely from the stress of managing
inventory, packaging, and shipping products. This is done by
connecting the customer to a manufacturer or producer.
Once a consumer has bought a product from you, it is passed
onto the supplier, who drop-ship it to the customer on your
behalf.

In drop-shipping, the retailer has no control over the quality of

the goods, as they never handle the goods. Hence, they must
research to ensure that the supplier is trustworthy and
reliable.

Compared to other business models, it's relatively cheap to

run and quick to set up, making it a great success for those
looking for hassle-free Amazon selling.

The business, however, can also cost the retailer money in

terms of refunds when the supplier delivers products of poor
quality or does not inform the retailer about out-of-stock
products.

Handmade
This is the most exhausting of business models, as it involves

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 the retailer making the products themselves. These products
may include jewelry, accessories, home decor, and more.

By creating their own products, the retailer is in absolute

control over the quality of the goods and can effectively
calculate their profit by calculating how much was spent
creating the goods and deducting it from how much they
were sold and the standard Amazon fee.

However, this is not the most popular business as many

retailers need more skills, time, workspace, and others to
create their products, hence the mode is often wildly
overlooked. It is also time-consuming and tasking, which adds
to its displeasure.

However, it is a lucrative business model as the retailer can

effectively manage the business budget. It is also a highly
profitable business model, although it is relatively slow.

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 AMAZON’S BUSINESS
MODEL CANVAS

The Amazon Business Model can be seen in the business

model canvas below:

Amazon’s Customer Segments

The customer segments of Amazon can be divided into three
separate groups: sellers, buyers, and developers.

Sellers:
This comprises all the businesses, individuals, and companies
that sell their goods to the company's large customer base.

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 Developers
This comprises all the communities, companies, and
businesses that use Amazon's cloud computing platform,
Amazon Web Services (AWS). These communities, firms, and
companies come from every industry or field and from every
size, which includes startups, enterprises, and public sector
organizations.

Buyers
This comprises all the millions of loyal customers who buy
their goods from Amazon.

These customers are tracked by Amazon using some

characteristics, such as interest, engagement, and personal
information (age, gender, geographical space, language, etc.).

Amazon’s Value Propositions

Amazon's Jeff Bezos defined the Amazon business model
based on three customer-focused value propositions: low
price, fast delivery, and a wide selection of products.

These three value propositions have helped Amazon become

one of the world's largest and most visited e-commerce
marketplaces. This is no surprise, as the three value
propositions come together to create convenience for the
customer, a much-sorted feature in modern-day e-commerce.

Customers worldwide can be assured of a reasonable price,

numerous options, and an agile, safe, and reliable delivery
service.

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 "I very frequently get the question: What's going to change in
the next 10 years?" And that's a very interesting question; it's
a very common one. I almost never get the question: What's
not going to change in the next 10 years? And I submit to you
that that second question is actually the more important of
the two because you can build a business strategy around
things that are stable in time.

In our retail business, we know that customers want low

prices, and I know that's going to be true 10 years from now.
They want fast delivery; they want a vast selection. It's
impossible to imagine a future 10 years from now where a
customer comes up and says, "Jeff, I love Amazon. I just wish
the prices were a little higher. I love Amazon; I just wish you'd
deliver a little more slowly.' Impossible. And so the effort we
put into those things, spinning those things up, we know the
energy we put into it today will still be paying off dividends
for our customers 10 years from now. When you have
something that you know is true, even over the long term,
you can afford to put a lot of energy into it. "

Jeff Bezos.

While there are other value propositions, we will be focusing

on these as they are the cornerstone of the company's
business model.

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 Low Price
The Amazon business model focuses heavily on the lowest
possible prices for buyers. This is done through the use of
Amazon's automated pricing. This system works by constantly
adjusting the cost of goods. These changes often depend on
competitor prices, demand and supply, and market trends.
Hence, it ensures that the price of goods is always in the
buyers' favor.

Fast Delivery
Amazon has built quite a reputation for itself in the shipping
department. The technological company facilitates hundreds
of thousands of fast and safe deliveries and shipping around
the globe to ensure the ordered product arrives at the
doorstep or pickup point of its intended customers.

This is thanks to its network of warehouses and external

shipping and delivery services, which the company uses to
deliver goods worldwide.

Amazon also introduced free shipping as a feature for

subscriptions to the Amazon Prime package. This feature
improves on an already impressive feat, as it brings in more
customers and revenue because it's free. This free shipping is
only bound to bring in more customers as the company
expands its arsenal of goods.

Large choice of Products

Amazon has come a long way from its humble beginnings of
selling only books. Today, the company caters to the needs of
millions of customers as "the everything store" has diversified
and added almost every conceivable good to its library.

The company continues to expand its options and goods to

try and meet the needs of every customer who visits the
online store.

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 It also arranges these goods in an easy-to-navigate manner
to increase customers' convenience as they shop.

Also, innovations like Amazon Kindle Direct Publishing for

books; audible for audiobooks; Amazon Music for music and
podcasts; and Amazon Prime for movies and videos increase
the organization of goods and, as such, increase the
convenience of the customer.

Amazon’s Channels
As expected of an e-commerce business, Amazon's biggest
channel is its e-commerce website, generating about $470
billion in 2021. However, the technological giant has other
successful channels like Amazon Prime, its streaming,
entertainment, and subscription platform, which garnered a
net income of over $11.79 billion in 2021, with over 200 million
users across 23 countries worldwide.

They also have their own cloud processing company, Amazon

Web Services (AWS), which in 2021 generated revenues of
62.2 billion U.S. dollars. The company also has other
subsidiary channels like Kindle Direct Publishing, Amazon
Music, audible, and so on.

As an online market, most of Amazon's marketing is done

digitally, including advertisements, sponsored publications,
and email marketing. This online market is expected to cost
approximately $32.6 billion by 2021.

Amazon’s Customer
Relationships
As a customer-focused company, Amazon takes the
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 customers' comments, suggestions, and opinions as seriously
as possible. The company aims to create a healthy and
long-lasting relationship with its customers.

In order to facilitate this relationship, Amazon maintains

several communication channels to allow the customer's
views to be heard. Some of such channels are telephone,
online chat, and e-mail contact. They also allow customers to
leave reviews or comments on the website and have been
known to reply relatively quickly.

They also allow customers to leave reviews on purchased

goods to help other buyers make smarter decisions. Some
guidelines guide Amazon's reviews to ensure the reviews
posted are useful and instrumental to the product's ranking. It
also encourages reviews through its early reviewer system
and allows users to vote for the most valuable reviews.
Estimates of the number of fake reviews range from 1%,
according to Amazon, vs. 30% stated by fake review
detection sites (both of which have an incentive to over or
understate the problem)

Lastly, using features like "Recommended for you,"

"Frequently bought," "Your recently viewed items and
featured recommendations," "Your browsing history," "related
to items you viewed," "Best selling," and "Off-site
recommendations via email." Amazon has made the customer
experience much more personalized.

Amazon’s Revenue Streams

Amazon is a company with numerous and diverse revenue
streams. Some of these revenue streams are:

● One-Time Sales: This is the revenue generated from

the sale of products that are delivered only once, but

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 not over a period of time.;

● Physical store: Amazon owns a few physical stores

that sell goods to customers. This store also generates
revenue for the company;

● Commission on Sales/ Retail third-party seller

Services: This is the revenue gotten from the
commission taken off of goods sold on the platform;

● Advertising: The Amazon website is very popular, and

as such, the company can leverage this and charge for
advertising products for other companies on it;

● Subscriptions (Amazon Prime): The company also

charges a specific amount for Amazon Prime on a
subscription-based payment method.

Amazon Prime gives customers access to a host of

fantastic Amazon products and services, like Amazon
Prime Video (the streaming service) and free shipping.

Others include: Web Services (AWS), Licenses, Patents, and

Pay-Per-Use & Support Subscriptions.

When put into segments, Amazon's revenue generated in

2021 can be divided into the following streams:

● Online stores: $222.1 billion

● Physical stores: $17.1 billion

● Retail third-party seller Services: $103.4 billion

● Subscription services: $31.8 billion

● AWS: $62.2 billion

● Other: $2.18 billion

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 Amazon’s Key Resources
Amazon's most significant resource is its technological
infrastructure, which must be kept secure and functioning for
the company to run smoothly. This technological
infrastructure consists of its websites and apps (such as
Amazon Prime Video, Kindle/KDP Audible, AWS, etc.),
including all the backends to them (including the logistics IT
backend).

An example of a loss created by the infrastructure crash was

back in 2013; Amazon was down for about 40 minutes,
resulting in a loss of more than US$ 5 million in sales.

Another Amazon resource is the company's delivery and

fulfillment network. This network comprises all the methods
and parts involved in transporting goods and producers from
the manufacturer or retailer to the customers who ordered
them.

This is one of Amazon's most significant resources, after

considering its technological infrastructure. This is because
the business model depends massively on the timely delivery
of goods.

Depending on the goods and customer location, there are

different delivery paths through the system. These pathways
include:

1. Inbound cross-doc center;

2. Airport hub;

3. Fulfillment centers (with various subtypes / those

storing certain types of goods);

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 4. Sortation centers;

5. Delivery stations;

6. Prime now hubs;

7. Amazon Fresh (which also has a pick-up option);

8. Brick-and-mortar retail.

As of August 2022, Amazon has made a significant

impression on the world of delivery with 1200 facilities in the
U.S. and 2200 across the globe, making this one of its most
enormous resources.

The next resource would be the brand name, which now

works on its own as an advertisement for the company itself.

Physical spaces used for warehouses, offices, supply chain

structures, and automation, among other things, are another
resource that the company cannot function without.

Amazon’s Key Activities

One of the essential key activities of the company is to
improve its value propositions. This means the company is
constantly and consciously focused on creating a better
experience for the customer, focusing mainly on maintaining
low prices, improving the speed of deliveries, and widening
the scope of its extensive product inventory.

To achieve its goal, the company invests in its website, app

development, and management. While simultaneously
managing its entire supply chain, storage, and logistics and
improving the information security on all platforms (including
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 e-commerce, streaming, cloud computing, etc.),

The company also focuses on producing films, series, and

other products for its video platform and on marketing all of
its products and services.

The company also manages its low prices through a pricing

strategy known as dynamic pricing or repricing. Amazon's
prices are affected by various factors, such as competitor
prices, demand and supply, and market trends.

These low prices of goods are also complemented by the low

delivery costs. This is thanks to features like free shipping
that are paid for through a subscription to Amazon Prime.

The company also offers the following services in order to

maintain its low prices:

1. Price dynamism: This is a pricing strategy in which

businesses set flexible prices for products or services based
on current market demands.

2. Price perception strategy: this is the practice of

downplaying the value of high-end products rather than
treating them as if they are unique. This type of psychology
could work because of price perception, which is how
consumers interpret the cost of things despite the price tag
that might be attached to the products.

Others include:

● Demand/supply pricing;

● Competition monitoring;

● Seasonal prices;

● Dynamic pricing for marketplace

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 bundling/recommendations;

● Deals/promotions;

● Data network effects; and

● Deceptive pricing.

Amazon’s Key Partners

A massively successful company like Amazon is bound to
have a lot of key partners who work with the company to
ensure it works perfectly.

Amazon's key partners consist of:

Sellers
Sellers are by far one of the largest and most essential
partners of Amazon. They are made up of companies,
individuals, businesses, and groups that sell their goods and
services through the company's e-commerce platform.

They make up about half of the company's revenue. There

are roughly 8 billion sellers worldwide using the Amazon
platform.

These sellers extend from small retailers to large brands like

Nike, Apple, Dell, etc., who have a presence on Amazon.

Affiliates
This section of customers consists of content creators,
bloggers, and other individuals and groups who gain a
commission for directing traffic or customers to the Amazon
platform to purchase goods and products.

According to ZipRecruiter, the national average salary for an

Amazon affiliate is $55,434 per year. The top 1% of earners

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 make between $111,500 and $121,000, while the lowest 10%
earn between $16,500 and $26,000.

Developers
This section comprises the developers and integrators who
specialize in AWS services and the tens of thousands of
independent software vendors (ISVs) who adapt their
technology to work on AWS. This section of partners is mostly
partners with Amazon's AWS.

Content creators
This consists of authors, writers, artists, and movie producers
who publish or release their creations on Amazon Kindle
Direct Publishing, Audible, Amazon Music, and Amazon
Prime.

Subsidiaries
These types of partners include companies that provide
storage spaces, stores, and systems. As well as
transportation and delivery systems, in addition to the brands
and products developed by Amazon itself, such as Amazon
Essentials, Amazon Elements, Amazon Elements, Kindle,
Alexa, etc

Although the company in-sources some of these jobs, due to

the overwhelming demand for goods, the company is forced
to rely on these partners to ensure the smooth running of
operations.

Amazon’s Cost Structure

Amazon is a behemoth of a company and assumes a cost
structure that does not differ from any you would expect from
a company of its size.

The company's cost structure consists of cost items such as

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 its complete IT structure, customer service center, software
development and maintenance, information security, and
marketing.

Physical spaces, such as fulfillment centers, sortation centers,

and delivery stations, also contributed to the total cost
structure of the company.

Below, there is a rough estimate of the company's cost

structure:

● Cost of sales: 58%

● Fulfillment: 16%

● Technology & content: 12%

● Marketing: 7%

● G&A: 1.8%

As expected, its biggest cost item is its cost of sales, with

approximately 58% of its revenue. This is because this covers
the cost of 3rd party or retail sales and is the company's
largest resource and, as such, its largest cost item.

HOW DOES AMAZON’S

BUSINESS WORK?

Amazon is a giant marketplace that runs a platform business

model at its core. The company runs this business model with
other separate units or companies all under the same

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 umbrella. Some of these units tie in well with the e-commerce
platform, such as Amazon Prime, which is a paid
subscription-based feature that allows the customer to enjoy
the premium version of the e-commerce platform as well as
rewards like free shipping and access to other Amazon units
like Amazon Prime, the video streaming unit, and Amazon
Music, the music and audio streaming unit.

Other units, like Amazon AWS, focus on the technological

aspect of the company. This unit focuses on improving the
technological infrastructure of the company.

According to Similar Web, Amazon has over 2 billion visits in

the U.S. On average, those people spend more than six
minutes on the site and look at almost nine pages before
purchasing what they're looking for. These products may
range from popular books to hard-to-find collectibles. "The
Everything Store" aims to cater to the needs of all.

This, in turn, makes Amazon the fourth most popular website

in the U.S. The Amazon business model revolves around four
major players:

Consumers
Consumers are the company's number one focus, as its entire
business model revolves around increasing the convenience
of consumers.

This was summed up nicely by the company in its annual

reports. Amazon stated,

"We serve consumers through our retail websites and focus

on selection, price, and convenience. We design our
websites to enable hundreds of millions of unique products
to be sold by us and by third parties across dozens of

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 product categories. Customers access our websites directly
and through our mobile websites and apps. We also
manufacture and sell electronic devices, including Kindle
e-readers, Fire tablets, Fire TVs, and Echo, and we develop
and produce media content. We strive to offer our customers
the lowest prices possible through everyday product pricing
and shipping offers, and to improve our operating
efficiencies so that we can continue to lower prices for our
customers. We also provide easy-to-use functionality, fast
and reliable fulfillment, and timely customer service. In
addition, we offer Amazon Prime, an annual membership
program that includes unlimited free shipping on tens of
millions of items, access to unlimited instant streaming of
thousands of movies and TV episodes, and other benefits."

Sellers
Sellers also stand as a strong pillar for the company and its
business model, as they provide its most significant source of
revenue and are the driving force behind the e-commerce
platform.

The company stated this in its annual report about sellers:

"We offer programs that enable sellers to grow their

businesses, sell their products on our websites and on their
own branded websites, and fulfill orders through us. We are
not the seller of record in these transactions. We earn fixed
fees, a percentage of sales, per-unit activity fees, interest, or
some combination thereof, for our seller programs."

Developers and enterprises

This comprises developers, programmers, and enterprises
such as start-ups, government agencies, and academic

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 institutions. These groups and individuals are the backbones
of Amazon's technologically advanced cloud computing
system, AWS.

The company explained its role in its annual report by stating:

"We serve developers and enterprises of all sizes, including

start-ups, government agencies, and academic institutions,
through our AWS segment, which offers a broad set of global
compute, storage, database, and other service offerings."

Content creators
This consists of authors and independent writers willing to
publish their works on Amazon's Kindle Direct Publishing. The
company also has separate platforms for musicians and
movie producers to release their products for the public to
patronize.

In the annual news report, the company had this to say about
this pillar of the company's business model:

This consists of authors and independent writers willing to

publish their works on Amazon's Kindle Direct Publishing. The
company also has separate platforms for musicians and
movie producers to release their products for the public to
patronize.

In the annual news report, the company had this to say about
this pillar of the company's business model:

"We serve 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. We also

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 offer programs that allow authors, musicians, filmmakers,
app developers, and others to publish and sell content."

For the Amazon business model to live up to its value, the

company has to generate a significant amount of revenue
from the business model. This is accomplished through the
sale of its vast array of goods available on its e-commerce
marketplace.

Besides the marketplace, customers also have access to

Amazon products (like Kindle and Echo) or the ability to
subscribe to Prime (to get faster delivery and access to an
on-demand library of content).

The company can also generate revenue from the Amazon

seller program. The company generates revenue through
fixed fees, a percentage of sales, per-unit activity fees, and
interest generated by the marketplace.

Lastly, the company earns 30% of royalties paid to Authors

who publish their works through Amazon's KDP platform (i.e.
Kindle Direct Publishing)

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 HOW AMAZON MAKES
MONEY

To understand how Amazon makes money, we need to look

at each of the different operations that take place under the
company's extensive corporate umbrella. These operations
include the Amazon Marketplace, Amazon Prime, Amazon
Web Services, Amazon Advertising, Amazon Patents, and
Amazon Kindle.

Amazon is one of the largest online marketplaces in the

world. In the U.S., the company is bigger than the next 14
largest U.S. retailers combined.

However, this behemoth of a company is run by more than

just its online store. Although it is the biggest revenue
generator, the company is backed up by many other business
segments, which work in tandem to achieve the business
goal.

According to Matthew Ball, managing partner of Epyllion and

former global head of strategy at Amazon Studios, it can be
described as "a series of interconnected elements that are
internally reinforcing and competitively exclusionary." This
means that an improvement in one of the business segments,
however minor, ultimately translates to a general
improvement in the company's overall business.

This diversification of Amazon’s revenue streams has been

key to its virtuous cycle, mainly as the company uses its
various business divisions to support and drive growth for

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 other divisions. The corporate powerhouse spans multiple
industries, moving well beyond retail e-commerce and firmly
into spaces such as cloud computing, online advertising, and
digital payments.

Below are the segments of Amazon's business model that

generate revenue for the company.

Amazon Marketplace
Through fees garnered from the promotion and
advertisement for goods, as well as sales of products on the
company's e-commerce platform, Amazon.com, this sector
accounts for more than 50% of the total income.

These sales include both physical and digital products

(including e-books, videos, games, music, and software).
Amazon's success and stronghold on customers rely on the
convenience and ease it provides customers as they browse
through its vast array of options for goods. The company's
most significant areas of potential is found in the use of
Amazon for discovery, inspiration, and impulse purchases.

The revenue generated is directly related to the number of

sellers on the company's e-commerce platform, with about 8
million businesses trading on the Amazon e-commerce
platform. The marketplace is easily the largest source of
revenue for the company

Online store sales, as the dominant revenue stream, saw

$66.08 billion in net sales as of the fourth quarter of 2020.
Including commissions, shipping fees, related fulfillment fees,
and other third-party seller services, third-party sellers in the
third quarter of 2020 brought in $30.32 billion in net sales.

According to the Q4 2021 earnings report, more than 130,000

third-party sellers worldwide surpassed $100,000 in sales on
Amazon between Black Friday and Christmas Day. U.S.-based

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 third-party sellers also smashed records, selling an average
of 11,500 products per minute.

Besides the online marketplace, Amazon also runs 600

physical stores in the U.S., including Whole Foods Market,
which Amazon acquired in 2017. The rest are
Amazon-branded stores, including Amazon Fresh (grocery),
Amazon Go (cashier-less convenience stores), Amazon 4-star
(featuring products with a four-star rating or higher on
Amazon.com), Amazon Books (carrying books and
electronics), and Amazon Pop Up (shopping center locations
that highlight various brands and trends).

In 2020, Amazon's physical stores pulled in a total of $4.69

billion in net sales. Although this number is relatively small
compared with the company's online marketplace, the
physical market serves as a discovery platform for the
products and services available through Amazon, in-store or
online.

Amazon Prime
This Amazon subscription-based business model offers
subscribers access to the platform's video and music
streaming catalogs, free two-day shipping, unlimited photo
storage, etc. in exchange for a monthly fee.

This business model has been instrumental in the company's

growth. It not only lures new customers with exciting content
and movies, but also leads them into the marketplace with
the lure of free shipping. Essentially boosting its revenue and
the marketplaces.

Amazon Web Services

Although not a huge source of revenue, Amazon's AWS
provides the company with significant revenue. In 2020, it
generated $17.78 billion in revenue.

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 This is done by providing companies with relatively cheap
on-demand services like computing, storage, networking,
security, databases, etc., which are accessible through the
internet across the globe, and the user is not required to
manage or monitor these resources.

It is one of the most comprehensive and broadly adopted

cloud platforms, offering over 200 fully featured services from
data centers in 26 countries globally.

Amazon Kindle
This platform not only allows authors and independent writers
to publish their books for 70% of their royalties. It also allows
customers to buy, browse, download, and read published
books, magazines, and newspaper articles available at the
Kindle store.

This e-reading marketplace generates little revenue, but

compensates by redirecting customers to the Amazon Prime
subscription. This raises the revenue generated by the
marketplace.

Amazon Patents
The company has about 24,355 patents globally. These
patents belong to 12,104 unique patent families. Out of
24,355 patents, 11,313 patents are active.

These patents are used by many technological giants like

IBM, Microsoft, Google, Samsung, Apple, eBay, Intel, Sony,
Walmart, PayPal, Sap, Se, AT&T, Cisco Technology Inc.,
Qualcomm, and Hewlett Packard. In order to use these
patents, the company must pay a fee to Amazon.

The company's patents are made under the name Amazon

Technologies Inc. Many of Amazon's patents are for highly
technical concepts in cloud computing or communication

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 between computers.

Amazon Advertising
Amazon's advertising company gains revenue by promoting
sponsored ads and videos for individuals, companies, and
enterprises. However, the company is only paid when
customers click on the ad of the seller, regardless of whether
the product is bought.

This marketing channel is highly effective as the people who

direct the sponsored ads and videos are already on an
e-commerce platform with the intention of purchasing
something.

It is the 3rd largest digital advertising company, behind

Google and Facebook. In 2021, Amazon's advertisements
brought in $31 billion in revenue for the company.

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 AMAZON'S REVENUE
MODEL

Amazon's highest revenue generator is the sale of products.

However, those product sales also have high costs. Thus, the
margins Amazon makes on them are thin.

Taking into account the company's operating income, one

would quickly notice that the operating income is fueled by
the company's services, which comprise seller services, AWS,
and subscription services.

It is a popular misconception that Amazon is a product

company. However, Amazon sells its products at a thin margin
(in fact, the cost of sales for Amazon is almost as high as the
revenue generated by its products).

This is because Amazon uses its products to ramp up its

service revenues, which is its true source of cash flow. This
means that although Amazon sells products at a thin profit
margin, the company uses its product sales to sell other
services it provides to essentially create more revenue for
itself.

Other parts of the Amazon business model, like Amazon

Advertising Services, Amazon Prime, and Amazon AWS, run
with much higher margins. Thus, Amazon's online stores are
the foundation for those other businesses that make the
company more profitable in the long run.

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 Amazon’s Cash Machine
This is the cornerstone of Amazon's ability to expand rapidly
and compete with other industries.

It is a crucial element of Amazon's business model. As stated

before, Amazon's online store functions on a tight profit
margin. This is not done due to oversight or bad planning, but
rather consciously to facilitate optimum convince for
customers when coupled with its fast delivery system, called
fulfillment systems.

This, however, creates the facade that Amazon does not have
a viable cash flow, since Amazon collects payments from
buyers quickly but pays its vendors with significantly longer
payment terms.

This system provides Amazon with short-term liquidity that

can be used to invest in different company sections. So, what
initially looked like a lousy cash flow is actually a viable cash
flow that allows the company to invest in and build other
parts of the company. This directly increases the company's
progress and ability to disrupt other companies in any
industry.

With the creation of the two-sided marketplace, the company

can increase the rate at which other sectors grow, and as
stated before, an improvement in one sector is progress for
the overall company, no matter how minor it may be.

So, through the Amazon cash machine system, the company

has access to an endless supply of short-term liquidity. As
such, the limitations to the other sectors' growth are the
company's imagination.

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 Amazon's Advertising Business
Amazon is the 3rd largest digital advertising company in the
world, behind Google and Facebook. At the same time,
Amazon more than doubled its advertising revenues from the
first nine months of 2017 compared to 2018. Indeed, revenue
went from $2.92 billion in 2018 to $6.72 billion in 2018,
compared to Facebook's $38.37 billion and Google's $83.68
billion.

The growth of the company's advertising company can be

traced back to the sheer number of retailers and
entrepreneurs who use e-commerce. This number is
expected to keep growing, and the advertising company will
continue growing because marketers are willing to pay for
Amazon's advertising services.

This section of the business has higher margins than online

stores' tight margins.

This growth intensified as Amazon's advertising revenues

reached over $30 billion in 2021. This was partially due to the
technological giant's ability to capture commercially relevant
traffic and funnel them to their accurate vendor, and also due
to the company's intensified effort to make sponsored
content available on its platforms

As of 2022, Amazon had successfully expanded the

availability of its sponsored content to its platform, paving the
way for unprecedented growth in the digital advertising
sector in the near future.

Amazon Prime
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 A mark of a good company is adaptability, with many
companies switching to subscription-based payments and
most customers preferring it. Amazon has also moved a
portion of this company to the subscription-based payment
system.

The inclusion of Amazon Prime into the company's arsenal

was a pivotal moment for the company. The logic behind this
new feature was the more people join the Prime
Memberships, the more products they purchase in the online
stores.

This was done by luring customers in with faster delivery

services and delivery services, as well as access to Amazon's
original content offered via streaming. This subscription
model also creates a more stable and predictable income
over time. As such, the company killed multiple birds with one
stone as the lure of the prime package caused an influx of
customers and, as such, growth in other sectors like online
sales and advertising.

As of 2021, Amazon has over 200 million Prime subscribers.

147 million are based in the U.S. Amazon Prime Video
counted more than 175 million unique viewers in 2021, and
Amazon recently acquired MGM Studios for $8.4 billion,
adding more exclusive movies to the platform.

Amazon AWS
Initially an experiment back in 2000, Amazon AWS became
an over-17 billion-dollar business in 2017.

AWS has also enjoyed higher profit margins and network

effects. Despite this, the company is focusing on this sector

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 and putting in more resources as it is the most likely future of
the company.

Thanks to AWS, Amazon has worked in cooperative

competition with many companies that utilize AWS. For
example, the Netflix streaming platform has been among the
primary customers of Amazon AWS cloud infrastructure, while
Amazon Prime has been among the competitors of the Netflix
Prime content platform.

The AWS sector has managed to keep a high-profit margin

over the last year. Still, as technology advances and
competition toward cloud computing gets more challenging,
and as AI gets commoditized, a margin decrease is expected.

Like all the other cloud players, AWS is working as the

underlying infrastructure for the Web and as the underlying
platform for the AI-powered Web, popularly known as the
Metaverse.

And as the years go by and the future grows nearer, Amazon

has positioned itself to dominate both the physical and virtual
business worlds.

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 THE AMAZON FBA
BUSINESS MODEL

The Amazon FBA Business Model is a streamlined way of

handling commerce.

As a seller, you must get a supplier (most of whom are

located in China) to provide the products and transport them
to the Amazon Warehouse. Amazon then handles storage,
shipping, customer service, and tracking.

The business model removes the added cost and hassle of

storage and logistics. Although it would require some upfront
capital, the model provides a higher level of ease, exposure,
and profit in the long run.

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 WHAT IS FBA?

FBA means "Fulfilled By Amazon." It is a business solution

that exploits Amazon's resources, giving online sellers the
freedom to make money without raising capital for storage
and handling.

It smooths out the backend processes for the seller and the
frontend processes for the buyer. When purchasing from
Amazon, most buyers would be unaware that they are buying
from a third-party seller.

FBA is every online seller's fairy godmother.

Examples of Amazon FBA

Listings
For a complete mental picture, here is an example of what an
Amazon FBA listing would look like:

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 How Does Amazon FBA Work
The Amazon FBA model works through a process containing
five critical steps, works by piggybacking off Amazon's site
authority. By using tools (like The Hoth or Ahrefs) and
maximizing the keywords in your listing, you can build
backlinks to your site and boost your sales without getting
penalized.

Benefit from Amazon Prime

One of the best ways to boost sales is through free shipping.
Amazon Prime is a program that awards users free shipping
on their purchases, ultimately saving them money. Using the
Amazon platform, you also get free shipping on your
products.

Benefit from Amazon Affiliates

Once your products are listed, Amazon affiliates drive traffic
to your listing and promote your products in the pursuit of
affiliate commissions. This comes at no cost or effort from
you. Everybody wins with Amazon affiliates.

Not limited to listing on Amazon

You can sell your products and secure your income through
multiple channels. You don't have to sell exclusively on
Amazon. Amazon FBA allows sellers to have their products
listed elsewhere, even in their own online store, if they have
one.

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 THE CONS OF THE
AMAZON FBA MODEL

Now we talk about the downsides, AKA the cons of the

Amazon FBA model. If there were none, the FBA model
would have been too good to be true.

Upfront capital
You must raise upfront capital before launching a business
using the Amazon FBA model. Then, as time passes, you
would also need to reinvest to continue the business. The
upfront capital takes care of the supply of the initial stock. At
the same time, the reinvestment handles the continuing
supply and restocking.

Choosing a supplier
The next hurdle to face is choosing a good supplier. Most
suppliers are located in China. The distance necessitates
remote communication, quality checks, and trial runs. You
might not immediately find a good supplier. Even when you
do, you have to cater to the problem of proper shipping
logistics to get the products to the Amazon warehouse.

Dealing with suppliers

You cannot bank on the reliability of a supplier a hundred
percent. Moreover, certain situations might arise that you
would have no control over.

For example, in the event of a demand surge, you cannot

know if your supplier will be able to keep up. Apart from this,

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 your supplier could suddenly change how they do business
and switch up their policies, creating gaps and delays in your
product supply.

A workaround would be to have alternative suppliers in place

in the case of any unforeseen hiccups.

Amazon only promotes successful products

Before you can benefit from Amazon's promotion algorithms,
you will need to do some work.
The Amazon algorithm promotes products that are already
gaining traction and selling well. This begets the need for you
to jumpstart your page traffic before you can use Amazon's
exposure.

Reliant on Amazon
Another downside of using the Amazon FBA model is that the
platform still belongs to Amazon. Therefore, you are subject
to whatever (lawful) decision they make regarding the
Amazon FBA, Amazon Prime, and even your product. Your
sales could suffer significant hits, and you would have no
opportunity for redress.

Own online store could be more profitable

\While Amazon FBA promises higher profit margins than its
counterparts, owning your online store could ultimately make
you more money.
You might have to work harder to create momentum for your
business, and you might also have to gather higher capital,
especially in the beginning. Over time, however, those
margins can peak higher than they would under the FBA
model.

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 WHAT BUYER PERSONA
BEST FITS THE AMAZON
FBA BUSINESS MODEL?

There are specific personas that fit the Amazon FBA business
model and would greatly benefit from it.

Portfolio Paul
Someone like Portfolio Paul has numerous income streams.
Because of the variety in his portfolio, he will jump at possible
assets that give him the luxury of his time.
The Amazon FBA model is primarily stress-free and can be
made even more so by hiring agencies that handle
everything involved. If you're like Portfolio Paul, you can
create space for yourself and time on your hands, while still
diversifying. The FBA model is suited to that.

DIY Dave
Mr. Dave loves to focus on the details of it all. Using the FBA
Business Model, DIY Dave will likely use every trick, strategy,
and utility at his disposal to smooth every ragged edge.
There are numerous ways to decrease overall costs, increase
margins, and facilitate growth for a listing. Mr. Dave is likely to
be jumping headfirst into those.

Flipper Fred
Flipper Fred is the kind of persona who never keeps things
on hand (or flipper) for too long.
He buys a business not to own it, but to raise the revenue

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 and sell it for a higher price than he got it. The Amazon FBA
business model is a goldmine for Flipper Fred when you
consider the model's increasing popularity.

Strategic Sally
Sally has a profitable Amazon affiliate website. After learning
about the FBA model, she decides to start selling her own
product and exploit her traffic and affiliate link.
The Amazon FBA model fits a persona like Strategic Sally,
who wants to expand her business into other interrelated
ventures.

Growth Strategies
Mr. DIY Dave is not the only one that should be interested in
smoothing ragged edges. There are many growth strategies
that you can employ to make your Amazon FBA business
more profitable.

Paid Traffic
Paid traffic is an easy and accessible option for directing
customers to your page. A lot of stores boost their revenue
with advertisements and paid traffic.
Optimize your campaigns and pay close attention to the
feedback to get the most out of your money.

Build a Brand
When it comes to diversification, building a brand for your
product makes it significantly easier.
When customers come across your products, which are
attached to a brand, instead of occurring randomly, it will be
easier for them to identify, even on a different channel. For
you, having a brand makes it easier to market said products.

Build an Email List

An email list might not be the preferred strategy for everyone.
However, if you own a brand with an established offering of
products, a mailing list would help you create a niche around

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 your business.

You can easily communicate with your buyers, facilitate

frequent purchases by updating them about your offers, and
continuously market your products with little to no cost.

Social Media
Just like with the mailing list, social media will bring you very
sizable returns if you decide to take the build-a-brand route.

The organic traffic raised from different social media can

make you a whole lot of money. You can also decide to boost
your online presence through paid ads on various platforms.
Apart from that, social media is free and would only require
some effort from you to build some traction around your
social media pages.

Twitter, Pinterest, and Instagram are great social media

platforms to consider.

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 AMAZON'S BUSINESS
STRATEGY

The internet's 2300% annual growth rate in 1994 inspired Jeff

Bezos to develop an online company concept. Due to the
success of technical industries like Microsoft, he decided on
Seattle.

Wikipedia claims that in addition to being one of the world's

most valuable brands, Amazon is among the most significant
economic and cultural forces globally. Before branching out
into other product categories, Amazon started as an online
bookstore.

Amazon employs a long-term

approach.
“We are confident in planting seeds and watching them grow
into trees.” -Jeff Bezos.

Amazon Web Services was established in 2002. It was

established to offer web developers APIs. Organizations like
Pinterest use

Key Features of Amazon's Business Strategy

Amazon pinpointed a few crucial elements for its success.
The first was a site with a well-known brand. When that was
accomplished, giving their clients quality value came in

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 second. And aside from these two, cost leadership and client
centricity were also included as other key features.

As was previously noted, Amazon began as a bookstore and

now sells anything that can be purchased online. Recently,
Amazon introduced Amazon Home Services, a convenient
method to order and schedule professional services like
furniture assembly, handyman, electrician, and plumbing on
Amazon.com.

Strengthening Amazon ecosystem

The cornerstone of Amazon's business strategy is its
cooperative strategy. The internet business established a
connection between its services and the expanding selection
of items. The ecosystem provides a number of advantages,
including low operating costs and ease of use for customers
who frequently use Amazon to use multiple and extra items
offered by the corporation.

The Amazon Ecosystem comprises authors, commentators,

merchants, app developers, etc., who collaborate with
Amazon to offer their clients valuable services. The top
leadership of Amazon is completely concerned with ensuring
that each element in its ecosystem benefits from one another.

Uncompromised focus on customer service

This is yet another important factor in Amazon's successful
strategies. Amazon prioritizes long-term profits over
short-term profits. Amazon's cooperation is unaffected by
competition. They are solely concerned with ensuring that
every customer is satisfied with the services they provide.

It is common knowledge that Amazon aspires to be the

world's most customer-centric company. Amazon works hard
to earn and keep its customers' trust and loyalty. They obsess
over their customers, which is a massive part of their success.

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 Focusing on Amazon's leadership values
Amazon's leadership principles describe how they do
business. According to them, how leaders lead and how they
keep the customer at the center of decisions.

"We hold ourselves and each other accountable for

demonstrating leadership principles through our actions
every day. Our unique Amazon culture, described by our
Leadership Principles, helps us relentlessly pursue our
mission of being Earth's most customer-centric company, the
best employer, and the safest place to work."-Amazon

Focuses On The Long Term, Not The Short Term

"We are comfortable planting seeds and waiting for them to
grow into trees. "-Jeff Bezos.

"We don't focus on the optics of the next quarter; we focus on

what will be good for customers. I think this aspect of our
culture is rare. "-Jeff Bezos

Strategy On Things That Don't Change

"Base your strategy on things that won't change….whereas if
you base your strategy first and foremost on more transitory
things-who your competitors are, what kind of technologies
are available, and so on-those things are going to change so
rapidly that you are going to have to change your strategy
very rapidly, too." -Jeff Bezos

Opportunities and Not Failures

Jeff Bezos has always focused on opportunities; he sees
setbacks as opportunities and solutions. This is proven
whenever Bezos talks about failure and planting seeds.
"We are planting more seeds right now, and it is too early to
talk about them, but we are going to continue to plant seeds.
And I can guarantee you that everything we do will not work.
And, I am never concerned about that."- Jeff Bezos.

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 Strong Values & Culture
Amazon has several leadership principles, such as:

● Customer Obsession

● Ownership

● Invent and Simplify

● Be Curious

● Hire and develop the best

● High standards

● Think Big

● Bias for action

● Frugality

● Earn trust

● Dive deep

● Disagree and commit

● Deliver results

Competitive Prices
Amazon maintains its management by means of developing
various product selections. They have moved from the arts
(literature, music, and movies) to online groceries, cloud
computing, and film and TV production. Amazon is regarded
as the "everything store". There are some abnormal
preferences of merchandise as well that can be found on
Amazon, such as a mannequin of a fat duplicate or inflatable
unicorn horns for cats.

Trains Employees To Understand The Customer

Jeff Bezos ensures that managers and all staff understand
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 the customer's experience. He arranges for them to take a
two-day training at a call center to allow them to understand
what the customer goes through and to ensure humility.

Focusing On SEO & PPC

Amazon focused 90% of its marketing budget on SEO and
PPC in 2015. Etsy is well-known for allocating a larger portion
of its marketing budget to search marketing.

After Amazon, Apple was at 85%, followed by Target, Best

Buy, etc.
Amazon is known for being successful with SEO and PPC
services. That's why over 50% of people visit Amazon when
searching for the desired product or wanting to make a
purchase.

Diversified Patent Portfolio

Amazon has long-term profits. Their preferred long term has
made it a dominant online retailer and arguably the largest
online retailer. The Seattle-based behemoth is also shown for
the variety of technology patents it has accumulated over
time. It is also known for its unmatched level of investment.

A study has shown that Amazon emerged in 2017 as the

global leader in R&D investment, with over $16.1 billion.

Investment in Different Technologies

U.S. e-commerce confirmed that Amazon has committed $1
billion to a new venture investment fund that aims to invest in
companies developing technology to support various
e-commerce business processes.

Amazon In Entertainment Sector

Amazon is aggressively competing in the entertainment
sector. Though Netflix is the biggest streaming service,
Amazon remains its strongest and biggest competitor.

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 "Amazon knows who you really are"

Amazon Prime offers free content for the hottest games every
month. Amazon Prime members now enjoy the best of
entertainment.

Becoming A Logistics Powerhouse

Amazon is on the verge of starting small warehouses to
support Prime Now and Amazon Fresh, its grocery delivery
service. In Germany, where a fast expansion in online grocery
delivery is expected, Amazon has been running warehouse
purchase plans to tap into the market opportunities.

What Has Amazon Been

Successful in?
Amazon grew from being a local bookstore to being one of
the biggest business industries to grace the planet Earth. Its
excellent user interface makes customers shop conveniently,
even from the comfort of their homes. It has provided
customers with free shipping, making it hard for others to
compete.

While Amazon started as a bookstore, within two months, the

company sold books in over 45 countries, making over
$80,000 every month. Right now, they make over $100,000
every 14 seconds.

Amazon became the E-commerce giant and faced different

court cases from Barnes and Nobles for being a false
bookstore, and Amazon won the case. Walmart also sued
them with allegations of them stealing some of Walmart's
secrets. Even still, Amazon won the case and continued
growing.

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 Statistics on Amazon's
Leadership
Amazon has an estimated 200 million visitors every month.
They have also generated $470 billion in revenue in 2021,
making it the third-largest company in the world by revenue.

Amazon Web Services(AWS) held responsibility for 13% of that

revenue. It also earned a $33.3 billion net income in 2021,
around half of which came from AWS. 66% of consumers start
their product searches on Amazon.

How Does Amazon Respond to

Competition?
As mentioned above, Amazon doesn't focus solely on
competition. They are more concerned about their customers'
well-being. Nevertheless, at some point, a business giant like
Amazon will face different sorts of competition.

Amazon doesn't have to deal with competition directly. Their

cost leadership strategy has them covered, and a huge
advantage they also have in hand is their customer obsession
strategy.

They provide many services for their customers on their

platforms and make it easy for them to purchase things.
While there is intense competition in the market, Amazon still
stands tall and dominant among all others.

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 How Does Amazon Position its
Brand?
Amazon's brand was worth $176 billion in 2015. The success
story of Amazon was developed by Jeff Bezos and how he
began his business, starting with selling books from his
garage to one of the biggest online businesses. Amazon is
known for putting its customers first.

How Does Amazon Maintain

Leadership?
Amazon's leadership style is famous for its high standards
and how they must be met by themselves and all the
employees. They hire and develop the best and most
exceptional talents.

"Leaders develop leaders."

Leaders think big. They think uniquely and differently in ways

they can serve their customers rightly and profitably. They are
known for listening attentively and treating their customers
respectfully; they also operate at all levels. Despite minor
setbacks the company faces occasionally, they rise to the
challenge and never settles for less, despite the numerous
competitors.

Product Selection
Amazon also maintains leadership with its product selection.
Amazon keeps its leadership by creating a diverse product
selection. They have moved from the arts (literature, music,
and movies) to online groceries, cloud computing, and film

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 and TV production. Amazon is known as the "everything
store." Some odd selections of products can be found on
Amazon, such as a model of a fat replica or inflatable unicorn
horns for cats.

Offering Various Features and Services

Amazon is divided into several segments:

● Amazon Prime

● Amazon Video

● Amazon Cloud Drive & Cloud Player

● Amazon Web Services

● Amazon Fresh & Amazon Prime Pantry

● Amazon Dash

● Amazon Kindle

● Amazon Echo

● Fire TV

Continually Improves the Customer Experience

Amazon is always on the move to improve and provide a
user-friendly interface for its customer service. They
implemented the use of drones to deliver their goods, which
started in England in December 2016.

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 How Does Amazon Respond to
Failures and Setbacks?
"Innovation needs Failure."

In the past, Amazon has listed many products that have

flopped in the business world. One of which is the fire phone,
which recorded a loss of over $170 million.

Others include;

● Amazon Spark

● Amazon Restaurants

● Pop-up stores

● Amazon Wallet

These are just a few of the many losses Amazon has

recorded in the past. Their numerous failures are part of what
made them the giants they are today. However, it is very
important to have more successes than failures in a business.

Taking risks is another important factor, as you will never

know what works for you unless you try. Amazon embraces
its failures and tries to learn from them.

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 Amazon Acquisition Strategy
Amazon has been harnessing its merger and acquisition
strategy because it has closed 30+ deals within the past 5
years. Within the first two quarters of 2017 alone, the
corporation closed eight deals that priced them.

The chart below summarizes Amazon's M&As from 2017 to

2021.

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 WHAT MAKES AMAZON’S
BUSINESS MODEL UNIQUE:
THE PRICING STRATEGIES

As we said earlier, Amazon was founded by American

entrepreneur Jeff Bezos in 1994 as an online bookstore by
the name "Cadabra, Inc.". Through the process of expansion
and the implementation of a two-sided marketplace system,
Amazon has grown to be the large online marketplace it is
today. Amazon (AMZN) serves as an intermediary for
buyer-seller interaction. Aside from serving as a platform for
sellers of all kinds of products to sell their goods, Amazon
also manages an array of its own goods and services,
including home technology and streaming services. Amazon's
strategy of meeting virtually every consumer demand earned
it the moniker "The Everything Store."

Amazon's pricing strategies have played a crucial role in the

success of its business model. It specializes in offering the
lowest possible prices for products and services that coincide
with market changes. Using artificial intelligence technology
and machine learning, Amazon has kept its pricing up to date
with the market and competitors. Highlighted below are some
of Amazon's winning pricing strategies.

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 Dynamic pricing
Also known as real-time pricing, dynamic pricing involves
setting the costs of products or services in a flexible manner.
This dynamic pricing is done through the use of pricing bots.
These bots utilize data from price algorithms to adjust pricing
based on various factors. The customer's location and activity
are factors that can influence the algorithm.

Other factors can range from the time of day, day of the
week, the available inventory of a product, and order history.
It can also be affected by preferences set for a product, the
expected margin on the product, the level of demand, and
competitors' pricing.

Dynamic pricing is a prevalent technique used in online

marketing. Through the collection and analysis of customer
data, Amazon can more accurately predict the amount of
money customers are willing to shell out for products and
adjust prices to fit that demand.

Online retailers like Amazon frequently employ dynamic

pricing by changing the prices of numerous products up to
2.5 million times per day. This spectacular strategy makes it
such that a product on the site changes price every ten
minutes. Notably, this consumer-oriented flexible pricing
technique helped boost Amazon's profits by 25% on average.

Psychological pricing
Customers who buy products on a budget will most likely
gravitate toward a cheaper product. Psychological pricing
takes advantage of this obvious consumer choice. By placing
retail prices at just-below whole numbers, customers will read
the price as lower than it is and treat it as a viable option.

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 Instead of outright displaying a product at the price of $4, for
example, retail outlets will place the product at $3.99,
therefore, playing on the customer's intuition as they will see
that as lower than the markup of $4.

Amazon's pricing algorithms use the psychological pricing

strategy to influence customers' buying decisions. Amazon's
prices are hailed as lower than those of its competitors,
making it more attractive to customers. Going beyond this
mild deception, Amazon offers discounts on best-selling
products while also taking the initiative to make rare products
more expensive.

Competition monitoring and

repricing
It is crucial to place products at an advantage in relation to
the market. Monitoring the prices of competitors gives a good
understanding of competitors' strategies. Automated
techniques of pricing optimization that suggest competitive
prices when doing a competitive product analysis keep a
company ahead of competitors.

With that being said, every seller on Amazon constantly

observes the prices offered by its competitors and reprices its
products to attract more customers on the platform and
achieve the coveted "buy box." Amazon uses algorithms to
keep track of changing prices. With this, they can set the
prices of products offered by various retailers accordingly.

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 AMAZON'S VIRTUOUS
CYCLE

Amazon's Flywheel, or "Victoria Cycle," as the company refers

to it, was first penned on a napkin by Jeff Bezos. It is a
business strategy that places improving the customer
experience as the primary way to attract customers and
third-party sellers to the platform. In addition, Amazon
improves the selection of products and the cost structure to
decrease prices, which further helps keep the flywheel
moving.

According to Jeff Wilke, Amazon Consumer's former CEO, the

process begins with the customer experience. It focuses on
these key elements: low prices, a large selection, and a great
delivery experience.

And because of their good customer experience, the site

gets a lot of traffic. Instead of monetizing that traffic by selling
Amazon products, the company focuses on allowing third
parties to sell their products on Amazon.

Rather than focusing all of its efforts on the products that

Amazon already sells, the company acts as a platform for
third parties to offer a selection that Amazon may not have.
That selection, in turn, further increases the customer
experience, allowing the cycle to reinforce itself.

Amazon is also known for its cash machine strategy, which

means that the company can operate efficiently even at very

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 tight profit margins. Instead of distributing money in the form
of dividends to its shareholders, Amazon turns it into lower
prices to customers. This strategy encourages customers to
buy more. Money accrued is also used to fuel other initiatives,
like the streaming network Amazon Prime.

The flywheel is a constantly moving structure that

strengthens itself and proves advantageous to third-party
sellers on the platform.

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 UNDERSTANDING
AMAZON’S FINANCIAL
MODEL

In 2021, Amazon generated over $33 billion in net income.

This profit was primarily driven by the company's Amazon
AWS business, which contributed over 55% of its operating
margins. Other profits came from areas like Amazon Prime
and ads. Amazon AWS is a major contributor to Amazon's
operating and net income. Amazon's e-commerce platform,
the online marketplace, operates at tight operating margins
since it's built for scale.

Amazon's business model consists of subsidiaries, including

but not limited to Amazon e-commerce, Amazon platform
business, Amazon AWS, Amazon Prime, advertising, and
more.

Amazon's diversified business model is one reason the

company makes so much profit. In 2021 alone, Amazon
accrued over $469 billion in revenues and over $33 billion in
net profits. The company's online stores contributed to over
47% of Amazon's revenues. Third-party Seller Services,
Amazon AWS, Subscription Services, advertising revenues,
and Physical Stores also play a role in Amazon's profitability.

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 AMAZON’S DIGITAL
DISTRIBUTION

Amazon's business model follows two main distribution

strategies:

1. Business-to-Customer: Its e-commerce platform is

consumer-facing, providing millions of products to
billions of users worldwide. The company targets
billions of consumers across the globe. Aside from
selling its own products, businesses and third-party
stores use Amazon's eCommerce platform to reach
customers. Amazon's eCommerce platform operates
on tight profit margins, yet it generates cash in the
short term. Amazon re-uses this cash to scale up its
operations quickly. This side of Amazon's operations
calls back to the virtuous cycle mentioned above. The
company focuses on having a wide variety of products,
low prices, and speedy delivery, all in a bid to increase
customer satisfaction, the primary goal. To top it all off,
over the years, Amazon has added Prime to enable
consumers to get free delivery.

2. Businesses-to-Business: Amazon serves as a

third-party platform and is one of the e-commerce sites
that attract not only buyers but also sellers, which
hosts other sellers. This aspect of Amazon's
operations consists of a network of entrepreneurs who
join Amazon to boost their sales. Third-party sellers
can decide to sell on Amazon and take care of the
fulfillment. Simply put, while they use the site, Amazon
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 will take only a small revenue cut as a distribution fee.
The third-party sellers could also decide to make use
of Amazon's inventories. In this scenario, the seller
won't have to store any inventory, and their products
will be sent directly to Amazon. This takes care of the
fulfillment. However, the seller ends up taking only a
small cut of the overall revenues, as Amazon
shoulders both the inventory, distribution, and
fulfillment.

Amazon AWS is the cloud infrastructure that powers up a

good chunk of the web. It is primarily a B2B and enterprise
platform and was born as a way for Amazon to offer
third-party sellers the ability to host their e-commerce on top
of Amazon. AWS is now a company with its own structure.
Amazon AWS also falls under the company's B2B structure.

On this side of Amazon's operations, Amazon offers a set of

artificial intelligence and machine learning (AI/ML) tools that
developers use to build cloud tools on top of Amazon AWS.
Amazon's AWS also operates a qualified sales force that can
sell those services to other businesses or potentially
enterprise clients.

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 AMAZON’S COMPETITORS

Here is a compilation of Amazon’s most significant

competitors:

Online stores
It's no secret that going online with a business is the best way
for sellers to reach a wider audience and attract new
customers. Moving online gives many entrepreneurs more
control over their businesses and a steady opportunity to
grow and eventually flourish. Nowadays, the amount of online
stores is estimated at over 24 million. These online stores are
a competitor to Amazon in niche areas where small
businesses can offer the best products in their fields that
Amazon lacks. It's easier for those businesses to offer
customized experiences and goods, whereas Amazon
cannot. For example, an individual with a particular custom
statue in mind can commission an artist to create the piece
through the artist's website. However, Amazon only has
readily available retail paintings that do not match the
customer's vision. Niche shops offer better quality in their
fields than Amazon with its retail products.

Walmart
Known mainly for being a widely available chain of retail
stores in the U.S., Walmart solidified its presence in the online
retail market scene in 2009 with the launch of Walmart
Marketplace. Walmart quickly rose to become one of

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 Amazon's major competitors. The company was already
known as one of the most budget-friendly stores in the U.S.,
so joining the e-commerce scene continued to thrive, solidly
becoming the second most popular online store in the U.S.

Alibaba
Alibaba is easily one of the world's largest retailers and
e-commerce companies. A Chinese company specializing in
e-commerce, retail, the internet, and technology, Alibaba has
operated primarily as a B2B — business-to-business —
platform since 1999. It is also one of the world's largest
artificial intelligence companies.

Alibaba's position as a multinational e-commerce giant puts

the company in competition with Amazon. Alibaba isn't
primarily a seller-to-buyer platform like Amazon. However,
many individuals use it for their shopping, taking time to
weed out untrustworthy clients.

Otto
The Otto Group started as a European-based mail-order
company and global retail and services group with around
43,000 employees. Otto's position as one of the world's
biggest e-commerce companies is thanks to its user-friendly
interface and the wide range of products it offers. Otto makes
sales in categories such as electronics, household items, and
fashion, putting it on par with Amazon in those fields.

Jingdong (J.D.)
JD.com, Inc., also known as Jingdong or Joybuy (formerly
360buy), is the largest retailer in China, a member of the
NASDAQ100 and a Fortune Global 500 company. The
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 Chinese e-commerce company has its headquarters in
Beijing. It is a direct competitor to the Chinese site for
business-to-consumer online retail, Tmall. Considering
Jingdongs' English version, Joybuy ships to more than 200
countries and is a clear competitor to Amazon.

eBay
Based in San Jose, California, eBay Inc. is an American
multinational e-commerce company that pioneered
customer-to-customer (C2C) online sales through its website.
Customers were capable of trading with other customers,
making it possible for them to find affordable second-hand
products and collectibles. The company has since evolved to
offer businesses-to-customer sales.

Unlike Amazon, eBay is more competitive, brandishes lower

fees with fewer restrictions, and is also a customer-loyal
brand.

Flipkart
Founded in India in 2007, Flipkart is an e-commerce company
headquartered in Bengaluru. Starting as an online book
retailer with country-wide shipping, Flipkart has become the
largest online retailer in India. Walmart acquired 77% of
Flipkart's shares in 2018, and currently, more than 100 million
accounts are registered on the platform. Amazon's presence
in the Indian market competes with Flipkart's prominence in
the country.

Rakuten
Rakuten Group, Inc. is a Japanese electronic commerce
company and online retailing firm based in Tokyo. It was
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 founded in 1997 and controls over 14% of the global
e-commerce market. Rakuten is a primary competitor to
Amazon in the Japanese market and has taken the initiative
to purchase products from companies around the globe to
expand its online presence. Rakuten is currently operating in
the U.K. and Canada.

Newegg
Founded in 2001, Newegg has been praised as the global
leader in selling PC components and helping popularize the
PC-building movement. The company has a strong pull
among PC and DIY enthusiasts. It offers a wide range of
electronics, including but not limited to computers, TVs,
cameras, and phones. Electronics is Amazon's most popular
category, and Newegg serves as an alternative to purchasing
electronics on the site.

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 AMAZON’S SWOT
ANALYSIS

Amazon is already one of the world's top business moguls, as

highlighted earlier. Looking at the company's SWOT analysis
gives insight into the strengths that keep Amazon at the top,
the opportunities it has for further growth, the weaknesses it
has to cure and the threats it should look out for.

Amazon's Strengths
Below, some of Amazon's key strengths are detailed.

Brand
As a global e-commerce giant and online retail market,

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 Amazon holds a strong position in the market and boasts a
successful brand image. When it comes to brand valuation,
Amazon has a brand value of $249 billion and falls to #2 in
the rankings, one behind, according to Interbrand's Global
Brand Ranking 2021.

Customer orientation
From Amazon's flexible pricing strategies to its personalized
suggestions and customer-friendly interface, Amazon
constantly works to cater to consumers' needs. Not only does
this create a community of loyal customers, but it also attracts
new customers to the brand.

Innovation
Amazon is constantly bringing new innovative technology to
the market. A few of these innovations include its streaming
network Amazon Prime, the digital assistant Alexa and
Amazon's e-book reader, the Kindle. Amazon keeps
developing new products and services while improving its
current lineup.

Cost
Amazon has only a small number of physical stores, so it
does not incur costs for maintaining them. Also, the company
has little inventory and has partnered with multiple
companies like Evi Technologies, Thalmic Labs, Shoefitr, The
Orange Chef, and lots more to control costs in some regions
of its supply chain. Thus, Amazon effectively delivers value to
customers and simultaneously maintains a low-cost structure.

Large selection
Amazon truly lives up to its name of being 'The Everything
Store' by owning an extensive mix of products, therefore
allowing customers to purchase virtually everything on its
platform instead of searching for alternatives. It's recorded
that, as of 2021, Amazon has sold 75 million products in the
Amazon.com Marketplace.

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 Partners
As mentioned earlier, Amazon has a low physical inventory
thanks to the partnerships the company has made, and it
serves as a platform for third-party sellers. The high traffic
volume on Amazon paved the way for third-party sellers to
sell their products through the site. There are more than 2
billion items available from third-party sellers on Amazon.
Amazon also partners with local supply companies to meet
the needs of customers in different countries.

Logistics
Amazon is known for its reliable and quick deliveries. This is
because Amazon makes use of highly efficient logistics and
distribution systems. Fixed rates for different delivery periods,
free shipping on some items, and agreeable return policies
put it ahead of competitors in the logistics arena.

Amazon’s Weaknesses
Highlighted below are some of the company's notable
weaknesses:

Imitable business model

In this age of information and communication technology,
online businesses are extremely common. One of Amazon's
weaknesses is that its business model is easily replicable.
This means that any company could achieve the same
success as Amazon, consequently leaving Amazon
susceptible to strong competitors. Companies such as Barnes
& Noble, eBay, Netflix, Hulu, and Oyster are already giving
Amazon a tough time.

Flops and failures

Amazon might be known for its ability to constantly shell out
new innovations. However, more is needed to guarantee that

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 such innovations will be well received. Company failures such
as the Fire Phone and the Kindle Fire smear Amazon's
successes.

Workplace conditions
In the past, there have been multiple negative reports about
Amazon's workplace conditions and employee treatment. In
2018, Vox published negative reports on employees'
treatment and workplace conditions against Amazon. Poor air
conditioning, timed bathroom breaks, and constant video
surveillance are mentioned in the report. Amazon delivery
drivers also allege that they're forced to urinate in bottles due
to the strict delivery time schedules and constraints. Amazon
employees in Germany went on strike in protest of unsafe
working conditions. These reports affect Amazon's
reputation.

Dependence on distributors
Amazon highly depends on distributors for its supply chain
work, which exposes the company to the prospect of being
strong-armed into unfavorable negotiations to avoid losing
distributors.

Amazon's Opportunities
Below are some prospects the company should consider if it
wishes to grow further:

Expansion
Amazon has already established itself as an e-commerce
giant in the United States and other developed nations.
However, it would do well to expand its operations in
developing markets.

Physical stores
As mentioned, Amazon has only a handful of brick-and-mortar

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 stores. By expanding physical stores, Amazon can become a
retail giant and improve competitiveness against big-box
retailers like Walmart.

Acquisitions
Amazon has made some significant acquisitions, such as
Zappos shoe and clothing retailer. More purchases like this
can increase market share and reduce the level of
competition.

Amazon's Threats
Below are some threats looming in Amazon's future:

Regulations
Some government regulations can threaten business
proceedings and distribution in some countries. Amazon
does not ship to Cuba, Iran, North Korea, Sudan, and Syria
because of such regulations.

Exploitative labor
Amazon is one of the three retail moguls facing scrutiny from
the U.S. for being associated with labor sources that have
been linked to human rights abuses and maintaining supply
chains with them. This exposes Amazon to reputational,
economic, and legal risks.

Cybercrime
The majority of Amazon's operations take place online, and
cybercrime is always a problem when it comes to online
operations. Amazon's online marketplace could be hacked,
and its customers' data leaked. This can cause the company
to lose customer trust and may place it in legal battles with
disgruntled customers.

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 Competition
In addition to the big retail companies mentioned above as
Amazon's competitors, the company's video streaming
service, Amazon Prime, also faces strong competitors such as
Netflix, Apple TV+, HBO Max, Hulu, Disney+, and more.

Recession
Like physical stores, online stores are not immune to
economic recession. Such an event can undoubtedly impact
Amazon's sales and slow its distribution.

Fake reviews
Reviews are an important part of online marketplaces, as
customers rely on them to make purchase decisions. Amazon
has a fake review problem, in which trolls or bots leave fake
bad reviews on products, discouraging customers from
purchasing. Amazon has already deleted thousands of fake
reviews from its platform. However, this problem has
worsened with the pandemic, and there seems to be no end
to it. Amazon should take measures to weed out bot users
and trolls.

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 THE ORGANIZATIONAL
STRUCTURE OF AMAZON

Amazon's organizational structure can be classified as

predominantly hierarchical, with key elements of geographic
divisions and function-based structure. The structure favors a
vertical, hierarchical approach. In this hierarchical approach,
operations are run upwards to a senior management team.
This team includes three CEOs and three senior vice
presidents responsible for reporting directly to the CEO, Andy
Jassy.

Four key features of Amazon's organizational structure are:

1. Hierarchical corporate structure: Amazon's

organizational structure used to be flat-line but, over
the years, the hierarchical structure developed due to
the immense size of the business. Amazon currently
employs more than 1.3 million people worldwide, so a
change was needed.

1. Hybrid project groups: The corporate structure works

with mixed project groups when developing new
products and services. Each field has its own
department, and specialists from the aforementioned
departments are rewarded with projects according to
their skills and the competency required for the
project. These employees can work as part-timers who
report to the heads of their departments and project
leaders. They can also be full-time project workers
who report to the project manager only for the project
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 duration.

1. Flexibility of the business: One might think that due to

the size of the company, the hierarchical structure
might be rigid. On the contrary, Amazon remains highly
flexible in adapting to frequent changes in its external
marketplace. The successful integration of hybrid
project groups plays a key role in maintaining the
flexibility of the business.

Amazon's organizational structure is broken down into

multiple small teams that deal with various aspects of the
business. Founder and former CEO Jeff Bezos is credited
with introducing the "two-pizza rule.'' In contrast, a meeting
should be held in teams small enough to be fed with only two
boxes of pizza.

1. Stability in the top management: Unlike many other

contemporary companies, Amazon has kept a stable
upper echelon, with many of the company's top
players having been at the company for years, if not
decades.

As mentioned earlier, a senior management team is at the top

of Amazon's organizational structure, reporting directly to
CEO Andy Jassy. This senior management team is also
known as the "S Team." This team of Amazon senior
executives works with Jassy to disseminate his ideas, solve
problems, set high-level goals, and shape company culture.
The S Team has executives in charge of several groups,
including finance, human resources, corporate affairs,
Amazon Web Services (AWS), worldwide consumers, Amazon
devices and digital management, operations, and legal and
secretariat.

Despite Amazon's worldwide reach, the company only has

two geographic divisions: North American and International.
Amazon utilizes groups according to the physical location

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 and related business goals. For example, the eCommerce
arm of the company, Amazon.com Inc., uses groups to
manage eCommerce operations based on geographic
regions, associated regulatory frameworks, and logistical
challenges. Subsequently, this allows Amazon to address
country or region-specific issues proactively and efficiently.

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 CONCLUSION
Amazon is arguably the largest and most successful
diversified company, raking in $33 billion in 2021 alone.
Amazon’s flywheel, widespread business ventures, and
carefully crafted e-commerce strategies keep the company
ahead of its competitors.

Despite its flaws and looming threats, Amazon remains

flexible and keeps shelling out innovations. Amazon appears
unbeatable, and the company will only continue to grow as a
profitable industry.

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 REFERENCES

The following references were consulted to create this Super

Guide:

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 ➔ https://amazonseoconsultant.com/amazon-fba/
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mazon/

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 ABOUT THE AUTHOR

Daniel Pereira is a Brazilian-Canadian entrepreneur that has

been designing and analyzing business models for over 15
years. You can read more about his journey as a Business
Model Analyst here.

E-mail Daniel if you have any questions

at: [email protected]
You can connect with Daniel at Linkedin:
https://www.linkedin.com/in/dpereirabr/

This PDF File was purchased by Punyapon - [email protected]

Copyright The Business Model Analyst - https://businessmodelanalyst.com/ - Distribution prohibited
This PDF File was purchased by Punyapon - [email protected]
Copyright The Business Model Analyst - https://businessmodelanalyst.com/ - Distribution prohibited