Online stores still represent the backbone of the Amazonbusiness model with over $222 billion in revenues for 2021.
Amazon has a diversified business model. In 2021, online stores contributed to over 47% of Amazon’s revenues, followed by Third-party Seller Services, AWS, Subscription Services, and Advertising revenues.
In 1999 Amazon third-party sales contributed to only 3% of Amazon gross merchandise sales.
By 2018, Amazon third-party sales contributed to 58% of the total gross merchandise sales on Amazon.
Amazon AWS is among the fastest growing business units, with over $62 billion in sales in 2021 and over $18 billion in operating income.
Amazon is grabbing a growing piece of the digital advertising cake, with over $30 billion in revenues from advertising in 2021.
Amazon’s core business is in North America with almost $280 billion in revenues in 2021, but it is diversified globally.
Amazon revenue breakdown for 2015-2021
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.
Amazon has a diversified business model that relies on several revenues streams. At its core, the online stores are still the primary revenue streams.
Followed by third-party Seller Services, AWS, Subscription Services, and Advertising revenues.
Amazon third-party sales vs. Amazon first-party sales
Amazon Marketplace is the world’s biggest online retailer, with sales greater than the eCommerce sales of entire countries. Marketplace Pulse estimates that there are over five million sellers on the Amazon marketplace, with over two million on Amazon.com alone. Amazon had enviable sales of over $232.8 bn in 2018 just from its product sales, with over 50% of sales coming from third-party vendors.
Over the years, Third-party sales have grown from 3% of the total to 58%.
Amazon helped independent sellers compete against its first-party business by investing in and offering them selling tools (inventorymanagement, payments processing, shipments tracking, reporting).
Programs like Fulfillment by Amazon and the Prime membership program improved the customer experience of buying from independent sellers, which made this business grow substantially over the years.
In 2018, gross merchandise accounted for 58% of the total Amazon online sales.
Year
Third party sales
First party sales
1999
3%
97%
2000
3%
97%
2001
6%
94%
2002
17%
83%
2003
22%
78%
2004
25%
75%
2005
28%
72%
2006
28%
72%
2007
29%
71%
2008
30%
70%
2009
31%
69%
2010
34%
66%
2011
38%
62%
2012
42%
58%
2013
46%
54%
2014
49%
51%
2015
51%
49%
2016
54%
46%
2017
56%
44%
2018
58%
42%
Amazon all segments margins vs. Amazon AWS
Amazon AWS follows a platform business model, that gains traction by tapping into network effects. Born as an infrastructure built on top of Amazon’s infrastructure, AWS has become a company offering cloud services to thousands of clients from the enterprise level, to startups. And its marketplace enables companies to connect to other service providers to build integrated solutions for their organizations.
Amazon AWS is among the fastest-growing Amazon business unit. With its scalable infrastructure, AWS grew to over $62 billion in revenues in 2021.
Also, AWS carries high operating margins compared to the rest of the Amazonbusiness model.
Indeed you can see from the graphic below, how, already by 2018, it was clear that AWS contributed to 58.7% of Amazon’s overall operating income.
data in billion dollars
Revenues (2018)
Operating Income (2018)
All segments (except AWS)
$123B
$5.1B
AWS
$25.7B
$7.3B
data in million of dollars
Operating income (2018)
All Segments
$5.12B
AWS
$7.29B
Amazon’s advertising business compared to Facebook, Google, and Bing
In 2021 Amazon generated around $31 billion in advertising revenues. Becoming one of the key competitors of the Google and Facebook duopoly.
To put things in context, Amazon’s advertising business has been growing substantially, and not it competes with other media tech players, like Google, Facebook, and Microsoft.
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’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.”
In the Amazon Shareholders’ Letter for 2018, Jeff Bezos analyzed the Amazon business model, and it also focused on a few key lessons that Amazon as a company has learned over the years. These lessons are fundamental for any entrepreneur, of small or large organization to understand the pitfalls to avoid to run a successful company!
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.
The Amazon Working Backwards Method is a product development methodology that advocates building a product based on customer needs. The Amazon Working Backwards Method gained traction after notable Amazon employee Ian McAllister shared the company’s product development approach on Quora. McAllister noted that the method seeks “to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it.”
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages on customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.
In the letter to shareholders in 2016, Jeff Bezos addressed a topic he had been thinking quite profoundly in the last decades as he led Amazon: Day 1. As Jeff Bezos put it “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
