World Business has never been the same since the inception of Amazon. This colossal e-commerce enterprise started as a bookstore in 1994 and has remained at the pinnacle of supremacy ever since.It has been adaptable and catered to almost every service in today’s evolving world.
Today, Amazon is widely considered as the best online site available which even other competitor sites such as Walmart have not been able to seize since 2015. Amazon lucratively overtook Walmart into becoming the most valuable retailer. It became the largest Internet Company by revenue as well as the eighth largest employer in the US.
Amazon has also launched its physical stores which enabled it in 2017 to garner 5 billion dollars in revenue. Amazon’s subscription service called Amazon Prime has also been a critical component in cementing its customer retention and winning over new consumers in the process.
Amazon has adopted multiple marketing strategies to continue reaching out to new demographics via solid tech infrastructure and lowering of prices. These provide for a myriad of reasons as to why Amazon has continued to thrive and innovate throughout its operation.
Business Model of Amazon
Known to be the largest online retailer worldwide, Amazon functions at a diverse pace in their product offerings. Many customers primarily choose amazon for its easy access and hassle free delivery.
Customers of Amazon
Both buyers and sellers come together at Amazon’s platform making an allowance for how it is a mass market. Where its brand is concerned, anyone that inherits internet connection is a potential customer.
Amazon’s customer base is also its most loyal one. Millions of people across the world have a Prime subscription and pay their fee for its services.
Value Proposition of Amazon
Competitive pricing, selection of goods, convenience and fast fulfilment all carry to Amazon’s value. Amazon has paved its position as providing a secure, trustworthy and well-stocked platform for shopping which is why customers persist to consume its services repetitively. The selection of goods it sponsors is authentic and widely sought after. It’s convenient, and fast-tracked services make for a robust strategy as well.
Channel of Amazon
Amazon’s website operates as its largest channel. Different versions exist on its site that aids customers worldwide. Apps have accelerated sales growth. Many affiliates have also taken their role in acting as a channel for Amazon like the Amazon Affiliate Program.
Customer Relationships of Amazon
Amazon is a brand that is heavily invested in the retention of its consumers. It has enjoyed a healthy and productive relationship with its customers for a long period of time. Some of their customer interactions take place with the reviews or comments shoppers can leave on their web page. Amazon also offers customer service through phone, online chat or email.
Key Activities of Amazon
Amazon’s key activities are as follows:
- Merchandising of its digital and physical goods.
- Development, design, and optimization of its Platform (website or apps).
- Manage supply chain and logistics
- Secure and build a partnership with its supplier and sellers
- Support the production of movies or show on its prime video platform
- Acquiring new ventures to support its ecosystem
Key Resources of Amazon
Amazon’s physical resources such as fulfilment centres (warehouses), and supply chain automation help in its physical resources. Its technological infrastructure, in particular, is crucial for its everyday business model.
The same is the case with its software engineers who are responsible for the creation of its online platform infrastructure.
Key Partners of Amazon
Among Amazon’s key partners-Sellers are by far it’s most important who singularly generate the most revenue for Amazon. Other authors, publishers, and logistic partners increase its value and aid in the conversion of many people into customers. Amazon values such partners and has many times credited them for their consistent growth.
Cost Structure of Amazon
Amazon’s cost structure is driven by value. It means that Amazon function on a system that only benefits them economically. It’s IT, and fulfilment centre is also a vital component in this regard as it enables Amazon to operate on a global scale. Other essential elements utilised in the cost structure of Amazon include its customer service centres as well as software development centres across the world.
Revenue Stream of Amazon
Prime remains Amazon’s primary Revenue Stream as it is accessible to more customers and in turn, generates the most revenue for them.
Other Amazon Revenue Models includes the Commission and Transaction Fees it makes from its products as well as the recent sale of E-books and digital content it has been utilising in its sales.
How Does Amazon Make Money?
That fundamental question can be answered extensively owing to the different models the company operates on in terms of revenue.
- In terms of retail revenue, Amazon ranked 6th globally in 2018.
- Projected revenues for Amazon in 2022 are $356b (Walmart’s 2018 revenues have surpassed half a trillion USD, $500.34b in 2018)
The Amazon.com website is Amazon’s primary revenue generator with millions of people seeking to buy products on its site. Amazon Marketplace (amazon.com) is a world class e-commerce platform where products from Amazon and third parties are sold to the buyers.
The subscription model that Amazon proceeded with has been a vital element in its growth strategy. It has led to more customers joining to gain memberships who then purchase the products en masse from online stores. The more products they purchase, the more revenue Amazon receives.
Prime is Amazon’s master subscription model and has now over 100 mn subscribers. It is an unlikely bundle composed of heterogeneous offerings that seems to have a great appeal to household consumers.
Some of the more prominent Amazon Prime Premium subscriptions offer to include:
- Twitch Prime
- Instant access to video streaming
- Free Two-Day Shipping with Amazon Prime
- Free unlimited photo storage
- Over two million songs on Amazon Music. Thousands of playlists and stations.
Amazon Web Services
AWS or the Amazon Web Services offered their IT infrastructure services in 2006. The Amazon web services stand today as one of the most calculable and reliable platforms in its entire industry. What makes it stand out is its low-cost infrastructure that connects limitless business worldwide. AWS continues to function as Amazon’s cloud business as well as providing computing for everyone be it startups or government institutions.
The Kindle has been successful in winning over new users and converting them to buy Amazon products and content at an exceeding rate.
It’s important to note that Amazon does not generate profit from Kindles, at least not directly. It is more of effective planning that is solely responsible for increasing traffic of a membership plan. The effectiveness of this strategy signifies the innovative magnitude of Amazon.
Amazon Media and Content
The Amazon Company has already advanced to the next stage by entering the video and music marketing industry. This strategy has proven to be successful owing to the sizeable revenue from which Amazon has accumulated since.
Amazon acquiredIMDB in 1998 (Internet Movie Database) is considered to be the most popular TV, celebrity and movie content source today. IMDB generates its revenue via subscriptions, advertisements, and promotions.
Amazon’s music store called Amazon Music much like its competitors like Spotify, encourages users to subscribe to get their favourite music at an unlimited rate. The music subscription is offered at a fixed monthly cost.
How the Covid-19 pandemic boosted Amazon Sales?
As the COVID-19 pandemic reshapes our world, more consumers have begun shopping online in greater numbers and frequency. According to new data released by IBM, the pandemic has accelerated the shopping experience from physical stores to digital by approximately five years. Department stores, as a result, are seeing significant declines. In the first quarter of 2020, department store sales and those from other “non-essential” retailers declined by 25%. This grew to a 75% decline in the second quarter.
The report indicates that department stores are expected to decline by over 60% for the full year. Meanwhile, e-commerce is projected to grow by nearly 40% by the end of 2021.
The pandemic has also helped refine which categories of goods consumers feel are essential, the study found. Clothing, for example, declined in importance as more consumers began working and schooling from home, as well as social distancing under government lock downs. However, other categories, including groceries, alcohol and home improvement materials, accelerated, by 12%, 16% and 14%, respectively.
Amazon is a global enterprise that has become indivisible from the world economy. It has become more and more industrious and has adapted throughout its inception with innovation and freshness. It will continue to grow and dominate the world of e- commerce.So far, it is running unimpeded and unparalleled. As long as it continues to develop new ideas and stay ahead of its competition, it is destined to remain at apex. Over the last decade, Amazon has become one of the most powerful, respected and feared companies in tech and beyond. It got there by actually doing what other companies say they do: focusing relentlessly on customers and being willing to experiment, fail and learn.