Some of the key strategies to take advantage of Amazon’s platform are about understanding customers’ needs, using testimonials and reviews, improve product variety while offering competitive pricing. While price and variety matters, it also matters to differentiate your offering compared to existing players.
Amazon has a diversified businessmodel. Amazon’s primary revenue streams comprise its e-commerce platform, made of Amazon labeled products and Amazon third-party stores. In addition to that, Amazon makes money via third-party seller services (like fulfilled by Amazon), advertising on its platform, AWS cloud platform, and Prime membership.
Whether you love, hate, or feel indifferent towards Amazon, you cannot deny the sheer scale of its success. At this stage, it likely accounts for a good chunk of the US e-commerce sales, and for many people it’s the default e-commerce destination.
And when you see a business dominate like that, you must learn from its methods. You don’t win points for originality, and it isn’t the ideas that matter anyway— it’s the execution.
Let’s take a look at how Amazon is leading the pack, and identify some takeaways that you can use to get your own store moving in the right direction.
Focus On Meeting Customer Needs
Customer obsession goes beyond quantitative and qualitative data about customers, and it moves around customers’ feedback to gather valuable insights. Those insights start by the entrepreneur’s wandering process, driven by hunch, gut, intuition, curiosity, and a builder mindset. The product discovery moves around a building, reworking, experimenting, and iterating loop.
Amazon is phenomenal at giving customers what they want. It collates information from its massive pool of users, analyzes the data, and comes up with simple solutions that seem obvious in hindsight but could easily have been missed. Before they essentially forced the entire e-commerce industry to provide free shipping, was it viewed as a prospective game-changer?
And did anyone else understand, as they do, that users will gladly accept recommendations? We like to know what combinations of items others are buying because it takes some of the work away from us. When you don’t feel like rummaging around the web for in-depth guides, a simple “Item X works well with Item Y” is incredibly convenient.
Bundles like this are powerful sales tools.
This system is a win-win of monumental magnitude. The user saves time and easily gets a bundle they know will function, and Amazon makes a huge sale in one fell swoop. Now, your store won’t have the resources and sophisticated infrastructure that Amazon wields, so you probably won’t be doing anything too complex— but you can absolutely optimize it to give people what they want.
You can provide manual recommendations of good combinations, and generally put yourself in their shoes to consider what elements of your store might discourage them from buying. How can you best give them what they want while also getting what you want?
If you get everything polished to a shine, plenty of your customers won’t even think twice before buying. That’s the kind of value proposition you’re aiming for.
Use Testimonials to Full Effect
Amazon SEO represents the set of marketing tactics that sellers on Amazon can employ to better rank their products’ pages organically (without paying for placement), thus building a continuous stream of customers on the store. In short, Amazon SEO leverages Amazon search capability to rank e-commerce pages and make more sales.
Amazon is packed with reviews. Some are short, some are long, and some are incredibly detailed with photos and illustrations, but the main thing is that the numbers are there and the prominence is absolute. And though it barely needs confirming (they wouldn’t put so much time into something that had no impact on revenue), the stats confirm that testimonials are hugely important for making sales.
So it isn’t enough to simply throw in the occasional review through manual uploading. Ideally, you need a full system for automating and presenting them as effectively as possible.
If your website is fully bespoke, you can embed a solution like Trustpilot. If you built it through one of the main online store builders, you should be able to find a free (or very cheap) review app or plugin to handle most of the work for you.
Here are just some of the free review apps you can get for a Shopify store, for instance:
Whatever route you take, you should ensure that every product has a good array of reviews that make sense and cover the basics. And whatever you do, don’t hide all the negative ones— it harms far more than it helps. People want to read believable comments, not filtered praise.
Expand Your Revenue Stream
Revenue modeling is a process of incorporating a sustainable financial model for revenue generation within a business model design. Revenue modeling can help to understand what options make more sense in creating a digital business from scratch; alternatively, it can help in analyzing existing digital businesses and reverse engineer them.
The Amazon Marketplace was a masterstroke, and it has given Amazon the kind of leverage that feels insurmountable. The idea was simple enough: build a strong retail platform with plenty of traffic, then tempt other retailers to share it instead of just trying to compete with it. They get more exposure, and Amazon gets a vast ecosystem that allows customers to buy pretty much anything they need from one e-commerce site.
Just think about how they get the best of both worlds. eBay, their chief rival as far as the scope goes, sells only third-party items. Most retailers sell only their own items. Amazon does it all. And there’s no reason at all why you can’t expand what you offer on your site too.
Think about your local community; all the small, niche retailers, and the entrepreneurs with quality products but ad-hoc distribution systems. You can give them a larger platform and provide value to your customers at the same time, making your store more appealing.
How Amazon draws sellers in.
If you’re e-commerce only, you can engage in some affiliate marketing, endorsing specific products that you don’t sell but know will be useful for your customers. If you set up your site through a store builder (as we previously touched upon), you’ll likely have the option of using an app or a plugin to add to your inventory through dropshipping. This is a hands-off practice that allows you to sell an item but plays no part in fulfilling the order once it has been placed.
If you have a retail location, though, you have even more options. You can find great local products and strike a deal to sell them at the checkout, rent out a corner to an aspiring magician, or charge a fee to play a band’s music in your building. And as long as you do it tastefully, and strive to be selective about the partnerships you form, your customers will appreciate the added variety.
A pricingstrategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricingstrategy aligns the customer with the company’s long term financial sustainability to build a solid businessmodel.
Be Willing to Adapt
One of the reasons Amazon has become so staggeringly effective is that it is entirely willing to let its creative team innovate and back them against mountains of precedent if necessary. In many cases, businesses get stuck in ruts where they just want to carry on with tactics that have worked before and fear that any change will be counterproductive. Not so with Amazon.
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.”
That’s how they’ve been able to move from retail to books, e-readers, operating systems, tablets, phones, drone deliveries, and now grocery stores. They’re willing to give new things a shot.
And yes, their astronomical piles of money allow them to do that but consider that as recently as 2013 they were widely questioned for not being all that profitable. The truth? They were taking that profit and investing it in the future— and now it’s paying off hugely.
So how can you apply this lesson to your store? It’s simple, though not easy: be creative, be fearless, believe in your ideas, handle your cash flow efficiently, and be ready to turn your business on a dime if the right opportunity comes along. The slower you are to take advantage of opportunities, the less you’ll get out of them.
Amazon is on top of the e-commerce world for a lot of really good reasons, so why not learn from the best? Model your retail approach on theirs, and you’ll be able to take advantage of the disruptions they’ve brought to the industry.
Amazon has a diversified business model. In 2023, Amazon generated nearly $575 billion in revenues while it posted a net profit of over $30 billion. Online stores contributed over 40% of Amazon revenues. Third-party Seller Services and Physical Stores generated the remaining. Amazon AWS, Subscription Services, and Advertising revenues play a significant role within Amazon as fast-growing segments.
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!
With 64,588,418 shares, Jeff Bezos is the primary individual investor. Owning 12.7% of the company. Other top individual investors include Amazon’s CEO Andy Jessy, who has 94,729 shares. Top institutional investors include mutual funds like The Vanguard Group (6.6% ownership) and BlackRock (5.7% ownership).
Amazon generated over half a trillion dollars in revenue in 2023, of which $231.87B from online stores, over $140.05B from third-party seller services, $90.76B from AWS, $46.9B from advertising, $40.21B from subscription services, $20.03B billion in physical stores, and $4.96B from other sources.
Amazon was profitable in 2023. On nearly $575 billion in revenue for 2023, Amazon generated a net profit of over $30 billion. Since 2014, Amazon hasn’t recorded a net loss, but it did record a net loss of over $2.7 billion in 2022, while it recouped that in 2023. Indeed, in 2014, Amazon reported a net loss of $241 million, and it would be profitable until 2021. In 2022, Amazon turned unprofitable again and highly profitable again in 2023.
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 subscription revenue in 2023 was over $40 billion, compared to over $35 billion in 2022 and nearly $32 billion in 2021. Amazon Prime grew from a $4.5 billion revenue segment in 2015 to an over $40 billion segment in 2023.
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.”
A regret minimization framework is a business heuristic that enables you to make a decision, by projecting yourself in the future, at an old age, and visualize whether the regrets of missing an opportunity would hunt you down, vs. having taken the opportunity and failed. In short, if taking action and failing feels much better than regretting it, in the long run, that is when you’re ready to go!
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model’s success.
Jeff Bezos was best known for founding eCommerce giant Amazon in 1994. However, the entrepreneur owns companies in several industries, including health care, retail, robotics, real estate, and media. Many of these companies have been acquired by Amazon over the years, but some have been the result of direct investment from Bezos himself (through his investment arm is called Bezos Expeditions).
Amazon is a consumer e-commerce platform with a diversified business model spanning across e-commerce, cloud, advertising, streaming, and more. Over the years Amazon acquired several companies. Among its 12 subsidiaries, Amazon has AbeBooks.com, Audible, CamiXology, Fabric.com, IMDb, PillPack, Shopbop, Souq.com, Twitch, Whole Foods Market, Woot! and Zappos.
The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.
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.
Bundles like this are powerful sales tools.
