Amazon has become a one-stop destination for everyone’s shopping needs and is correctly called ‘the everything store’.
Today, the company has a market capitalization of $1.115 Trillion. With such a complex ecosystem comprising several entities and millions of customers, it is crucial to understand every aspect of this e-commerce giant’s business model.
Amazon Business Model
Amazon has come a long way from being a simple, one-sided e-commerce company to developing its own massive ecosystem. Today Amazon has incorporated various units within its business model, including a one-sided platform, two-sided marketplace, web services, kindle marketplace, an app store, prime video, game studio, and even retail stores called Amazon Go. All these diverse ventures add to the revenue stream of Amazon, making it one of the biggest companies in the world.
Although Amazon deals in numerous products and has set foot in multiple industries, its core business model is based on an e-commerce market platform. Thus to completely understand the massive business model of this tech giant, it is crucial first to take a look at the Amazon marketplace.
What Is Amazon Marketplace?
Amazon first started as a digital bookstore when only 0.447% of the total world population had access to the internet. Today it has evolved into the world’s largest retail marketplace platform and is popularly called ‘the everything store.’
The Amazon marketplace is an online two-sided e-commerce platform where third-party sellers and Amazon sells products from various categories, including electronics, gaming products, apparel, home decor, B2B business products, garden products, etc. The marketplace provides a platform for buyers and third-party sellers to interact and trade.
Amazon marketplace also includes the Kindle store, which allows readers to browse and download various e-books, newspapers, magazines, etc. Thus, the marketplace provides a platform for publishers and readers where they can trade and interact.
Adding Value
Amazon’s consumers are the people who use the marketplace for their shopping needs. The platform provides multiple options to the consumers at the lowest prices with fast deliveries and an overall enhanced shopping experience.
Amazon is a customer-centric company and provides immense value to its customers through its easy-to-use and easy-to-browse interface, review systems, recommendations, and gift certificates. Moreover, the platform has greatly reduced the shopping time as now customers complete around 28% of their purchases in three minutes or less. All these features combined contribute to customer value creation which gives them more incentive to use the platform. According to Amazon’s annual report, the total customer value creation in 2020 itself was $164 billion!
Amazon’s Operating Model
Amazon operates on the business model of a two-sided marketplace. It provides a platform for the buyers and sellers to easily interact and trade with each other without much hassle or difficulties. The company has designed a vast operating model to fulfill the needs and demands of each consumer. It manages the production, packaging, shipping, and delivery of a large number of products to provide everything to customers at the lowest possible price, wondering to start your own store on Amazon? check which products perform best &use amazon profitability calculator to analyse potential profits from sales.
