The giant behemoth in the E-commerce business who look like the only player who might be able to conquer e-commerce worldwide. They have leading them one of the finest entrepreneurs in the world, Jeff Bezos. Let’s go through their different business models and get to know how does Amazon makes money and earn profit.
When Bezos started his company he went through a process he calls ‘The Regret Minimization Framework’. This basically meant, as you grow older, you would want to minimize your regret as much as possible and that meant doing whatever it takes and wherever your dreams guide you.
With a man, who thinks so much, they ought to have a well-planned business model as well. And that is right, Amazon owns a lot of properties that make a lot of money and I’m not talking about their E-commerce venture.
Amazon Retail – The Store
This is what Amazon is most popular for, their online store. Although Amazon is mocked in the media and on Twitter because of their lack of profitability in this business, the truth is Amazon is playing the long-term game. Jeff Bezos is the king of long-term thinking and that can’t be explained better than this story.
Jeff Bezos out of his own pocket spent $42 Million for a giant clock that he hopes will run for 10,000 years. It’s his testament to the power of long-term thinking.
Amazon hopes to beat out their competitors with tight pricing, world-class customer service and brilliant automation. As they are willing to bet on the future, Amazon’s hope is to keep the business surviving as long as possible and by slowly eliminating the competition.
They are also using automated systems to make the flow of the product, from the warehouse to the consumer as fast as possible. They invested in Kiva systems, a company that builds robots that automate the warehouse process.
Amazon’s retail business isn’t profitable as much because they invest back the money into systems like the one you see above that give them a competitive advantage.
To show how competitive Jeff Bezos and Amazon are, here is an example. When India’s top e-commerce retail store Flipkart, raised money from Investors for over a $1 Billion, Jeff Bezos announced the very next daythat Amazon will invest $2 Billion dollars in India’s operations.
MUST READ : Secret Behind Amazon Logo
Amazon Web Services
Started in 2003 as a platform to handle Amazon’s rapid scale, their management team decided they could take this to other customers who faced similar problems in scale as well.
As a result this business has been the most profitable for them. AWS’s revenue only makes 7% of the total revenue of Amazon but their profits are around 50% of the total. This shows that this business does exceedingly well and Amazon uses the profit from here to fund their retail operations.
Amazon Physical Products – Kindle / Echo
After they started, Amazon became the largest book store in the world because of the unlimited options on their website. They have fueled this growth by creating hardware products like the :
- Kindle Reader
- Kindle Fire tablet
- Amazon Echo
- Amazon Fire TV
Amazon own a lot of Internet properties that are very popular. Some examples are :
- IMDB –They monetize through a premium service that lets you access their database of actors/producers/writers/directors and more. They also charge to upload your resume or work. They also make money through advertisements on the website.
- Alexa.com – As many of you would know, Alexa is a traffic analysis platform; they have pivoted into a ‘Digital Marketing Tools’ company. It is a SAAS based model.
- Audible –This is a platform for Audio books which are pretty popular because of their ease of communication.
They own a host of other peoperties like Goodreads, Createspace, Teachstreet, buyvip, shelfari and more.
Did you know Amazon have their own movie studio? It’s called Amazon Studios, where they make movies and Tv shows.
Amazon very similar to other companies in the technology space explore multiple business models. But, what differentiates them is the kind of business they enter. It would seem like an odd move forAmazon to start a movie studio, but that is exactly what they do. Amazon is a learning and adaptive company led by a visionary leader. Sooner or later Amazon’s numbers will reflect the value of their products and company.