Amazon Revenue Model

Group 3
Ankitha Kuriakose
Divya Dcouto Joan
Mary Ann Manuel
Praveena K B
Sharon Antony
T C Nithin
• Started in 1994 as a bookstore, Amazon soon expanded and
became the everything store. While the company
core business model is based on its online store.
• Amazon launched its physical stores, which generated already
over five billion dollars in revenues in 2017.
• The core business is the foundation for other emerging
businesses that run with different logic to its online stores.
Where online stores run at tight margins and high volume by
taking advantage of cash conversion cycles.
• Other parts of the Amazon business model, like Amazon
Advertising Services, Amazon Prime and Amazon AWS run
with much higher margins.
• Thus, Amazon online stores are the foundation for those other
businesses that make the overall company more profitable in
the long run.
• Key element of the Amazon business model - cash
machine business strategy
• In short, Amazon has operated (and still does) for years at
very tight profit margins on its online store.
• The company has willingly done so throughout the years,
as it made its prices low, convenient compared to
traditional physical stores, and with a fast and efficient
delivery system.
• Collects payments quickly from its customers, it then pays
its vendors with relatively longer payment terms.
• This gives Amazon short term liquidity that can invest back
to speed up growth. With this mechanism, Amazon has
been able to disrupt several industries. Starting as a
bookstore online, it quickly expanded in all the other
industries.
• Amazon more than doubled its advertising revenues from
the first nine months of 2017 , compared to 2018
• Still a small player compared to Google and Facebook
• However, since Amazon runs a diversified business model,
with several revenue streams, it gives the company more
space to experiment with advertising
• With such an infrastructure and many e-commerce hosted
on Amazon infrastructure, more and more entrepreneurs
and marketers are willing to pay for Amazon advertising
services.
• This part of the business has higher margins compared to
the tight margins of the online stores
 Amazon Prime
• Many companies nowadays have shifted to the subscription business model. Amazon has
converted part of its business to accommodate this change.
• Amazon Prime is a critical element of Amazon growth strategy. The logic is simple, the more
people join the Prime Memberships, the more products they purchase on the online stores.
• Indeed, with Prime, members enjoy from faster delivery services besides the access to Amazon
original content offered via streaming. This subscription model also creates a more stable and
predictable income over time.
 Amazon AWS
• Started as an experiment back in 2000, the Amazon AWS has grown to become an over
seventeen billion dollars business in 2017. AWS also enjoys higher margins and network
effects.
• Amazon is doubling down on that as this business unit will be critical to its future succes.
 Summary and Conclusion
• What makes Amazon so compelling is the business model
which generates value for several players.
• Consumers find products at a lower price and get them fast.
Sellers can find new market opportunities or decide not to
carry any inventory. In fact, Amazon has its own fulfillment
center that manages the inventories for sellers.
• Thus, that makes it easier for anyone willing to start an online
store to have lower barriers to entry. Developers and
enterprises can rely on AWS cloud services.
• Content creators can effectively monetize their info-products
through programs like KDP. And customers can consume
Amazon original content via Amazon Prime.
• Even though Amazon makes almost 70% of
its revenues through products sales. In reality that part of the
business is the foundation to grow other more profitable
segments.
• From Prime, Advertising and AWS, thanks to its cash machine
Amazon has been able to create a diversified business model.
• Amazon shows us a valuable lesson. Often, a company to
become a multi-billion enterprise has to create a
hybrid business model that takes advantage of several
revenues and business model at once.
Thank You…