amazon-distribution-strategy

Amazon Distribution Strategy

Amazon’s business model follows both a B2C and B2-B distribution strategy. Indeed, on the one hand, its e-commerce platform is consumer-facing, providing millions of products to billions of users around the world. While its e-commerce platform is also used by other businesses, called third-party stores to sell their own products on top of Amazon.

Amazon Hybrid Distribution Model Explained

Amazon e-commerce first party business

Amazon e-commerce, is a B2C business, which targets billions of consumers across the world.

The B2C e-commerce is run for scale.

In short, it has tight profit margins, yet it generates cash, in the short term (see cash conversion cycle), which Amazon re-uses to quickly scale up its operations.

This side of the business is all about a wide variety of products, low prices, and very fast delivery.

On top of it, over the years, Amazon has added Prime, to enable consumers to get free delivery.

Amazon third-party platform

Amazon third-party platform, is the part of the e-commerce which hosts other sellers.

And it enables them to sell on top of Amazon.

This side of the business is comprised of an ecosystem of entrepreneurs who join the Amazon platform to amplify their sales.

Third-party sellers can chose to sell on Amazon, and take care of the fulfilment. In this case, Amazon will take only a small cut of the revenue, as distribution fee.

Or they can decide to leverage Amazon’s inventories. In this case, the seller won’t have to store any inventory, which will be sent directly to Amazon, which takes care of the fulfilment.

In this case, the seller takes only a small cut of the overall revenues, as Amazon takes care of both the inventory, distribution and fulfilment.

Amazon AWS

Amazon AWS, is the cloud infrastructure, which powers up a good chunk of the web.

Amazon AWS is primarily a B2B and enterprise platform, which has become a company within Amazon.

amazon-aws-business

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 logics.

In this side of the business, the distirbution approach is quite different.

On the one hand, it’s a bout offering a set of AI-ML tools, which are used by developers to build cloud-tools on top of Amazon AWS.

On the other side, it’s about a qualified sales force which is able to sell those services to other businesses or potentially enterprise clients.

Two souls, a single tech giant

As we saw, Amazon has two souls.

On the one hand, it’s a strong consumer brand, which leverages a powerful flywheel, to enable low prices, wide variety, and very fast delivery.

That is how Amazon defines customer obsession.

On the other hand, it’s also a B2B or enterprise platform.

Where with AWS sells its cloud services to other businesses or enterprises

Connected Concepts

amazon-vision-statement-mission-statement (1)
Amazon’s mission statement is to “serve consumers through online and physical stores and focus on selection, price, and convenience.” Amazon’s vision statement is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.” 
amazon-business-model
Amazon has a diversified business model. In 2021 Amazon posted over $469 billion in revenues and over $33 billion in net profits. Online stores contributed to over 47% of Amazon revenues, Third-party Seller Services,  Amazon AWS, Subscription Services, Advertising revenues, and Physical Stores.
amazon-revenue-model
Amazon has a business model with many moving parts. With the e-commerce platform which generated over $222 billion in 2021, followed by third-party stores services which generated over $103 billion, Amazon AWS, which generated over $62 billion, Amazon advertising which generated over $31 billion and Amazon Prime which also generated over $31 billion, and physical stores which generated over $17 billion.
cash-conversion-cycle-amazon

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