Amazon Value Proposition In A Nutshell

A company like Amazon has multiple value propositions, as it serves several target customers in different markets. With its mission “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’s value propositions range from “Easy to read on the go” for a device like Kindle, to “sell better, sell more” to its marketplace.

Aspect	Explanation
Definition	The Amazon Value Proposition refers to the unique set of benefits and advantages that Amazon.com, the multinational e-commerce and technology giant, offers to its customers. It encompasses a wide range of services, features, and customer-centric elements designed to provide convenience, selection, and cost-effectiveness in online shopping and related sectors. Amazon’s value proposition is characterized by its customer obsession, extensive product catalog, fast and reliable delivery, digital services, and customer-centric innovation. It aims to make Amazon the “Earth’s most customer-centric company” by continuously enhancing the customer experience.
Key Concepts	– Customer Obsession: Amazon’s unwavering commitment to meeting customer needs and preferences. – Product Selection: A vast and diverse catalog of products, including third-party sellers. – Convenience: User-friendly website, mobile app, and seamless shopping experience. – Prime Membership: Subscription service offering benefits like fast shipping, streaming, and exclusive deals. – Digital Services: Amazon Web Services (AWS), Kindle e-readers, Amazon Prime Video, and more.
Characteristics	– Extensive Catalog: Amazon offers millions of products across various categories. – Fast Delivery: Amazon’s Prime program provides fast and reliable shipping options. – User-Friendly Interface: The website and app prioritize ease of use and navigation. – Digital Ecosystem: Amazon’s digital services include cloud computing, e-readers, streaming, and smart devices. – Customer-Centric Innovation: Continual innovation to enhance the shopping and user experience.
Implications	– Customer Loyalty: The value proposition fosters customer loyalty and repeat business. – Market Dominance: Amazon’s approach contributes to its position as a dominant e-commerce and technology player. – Competitive Pressure: Competitors must strive to match or surpass Amazon’s value proposition. – Supply Chain Efficiency: Amazon invests heavily in logistics and fulfillment centers to meet customer expectations. – Digital Transformation: Amazon’s digital services and cloud computing influence various industries.
Advantages	– Convenience: Amazon provides a convenient and seamless shopping experience. – Product Variety: Extensive product selection caters to diverse customer needs. – Fast Shipping: Prime members benefit from quick delivery options. – Digital Content: Access to digital books, movies, music, and more through Amazon’s ecosystem. – Innovation: Continuous innovation enhances the overall customer experience.
Drawbacks	– Competition: Amazon faces competition from other e-commerce giants and retailers. – Privacy Concerns: Handling customer data and privacy issues can be challenging. – Labor Practices: Scrutiny regarding labor practices and working conditions in fulfillment centers. – Regulatory Scrutiny: Antitrust and regulatory issues due to Amazon’s market influence. – Counterfeits and Fraud: Challenges related to third-party seller products and counterfeit goods.
Applications	Amazon’s value proposition applies across its various business segments, including e-commerce, cloud computing (AWS), digital content (Prime Video and Kindle), and smart devices (Amazon Echo). It extends to both individual customers and businesses.
Use Cases	– Online Shopping: Customers visit Amazon for a wide range of online shopping needs. – Cloud Computing: Businesses rely on Amazon Web Services (AWS) for cloud infrastructure. – Entertainment: Users access digital content through Prime Video, Kindle, and Audible. – Smart Devices: Amazon Echo and Alexa-powered devices offer voice-controlled experiences. – Third-Party Sellers: Amazon provides a platform for third-party sellers to reach a global audience.

Table of Contents

Background story

As the author of The Value Mix I’ve designed and gathered a range of innovative tools that product managers and entrepreneurs can use to create new products and services. In this article, I’m analyzing some value propositions of Amazon. Value proposition design is a key element for a company’s success to deliver products that people want.

Many people see Amazon’s value proposition as being the “everything store.”

But as a company, Amazon has more to offer.

Let’s dig into some of the main value propositions of the company.

(For more about value proposition design, read Hacking Value Proposition Design.)

A suite of value propositions

Amazon started as an online book store.

But over the years, through acquisitions and internal developments, the company now offers a suite of value propositions to sometimes very distinct types of customers.

There’s a lot to learn for product managers and entrepreneurs.

Digging into Amazon’s business model and value proposition can help you understand the nuts and bolts of running an e-commerce business.

One big takeaway is how Amazon focuses on increasing its customer share. Of course, Amazon has a significant market share. What matters even more to them is to delight its customers so much that they mostly use Amazon’s products and services.

This truly fits with Amazon’s mission statement “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.”

Kindle: Easy to read on the go

The Kindle doesn’t appeal to everyone.

You often hear people saying:

“I can’t read on a screen.”
“I prefer the feel of holding a physical book.”
“I love the smell of a new book.”

These people aren’t Kindle users.

That’s okay. Amazon knows that they target a particular audience.

These people have a few things in common. They love reading–often more than one book at a time. They’re often on the go (commuting or traveling). So they want to travel light.

And here, the Kindle offers a great customer experience. It has a great choice of books that you can download from anywhere. You can store more books that you could read in a year in a device that is lighter than most paperback books.

The Kindle is the dream tool for any hardcore reader.

Prime: Anything you want, quickly delivered

Prime represents the quintessential value proposition of online convenience.

It serves an audience of people who tend to be in a hurry. If they need something, they cannot be bothered going to a shop and don’t want to wait more than a day before it gets delivered.

The free one-day delivery is at the core of the customer experience. But I think people also like how privileged they feel. It’s not for everyone.. and this sense of exclusivity is also comforting.

On top of that, Amazon bundles free fast delivery with many add-ons such as Amazon Video and Kindle Unlimited. This is a great deal and reassures those who feel concerned about subscribing to Prime. It’s not just a discount delivery but a real membership with many benefits included.

It gives them a great sense of value.

Marketplace: Sell better, sell more

With Marketplace, Amazon targets business owners who are eager to reach larger audiences.

Their challenge is to drive enough traffic to a website and convert this traffic into sales. Amazon Marketplace gives them the tools to sell more.

For example, Amazon offers tools such as Reviews and Questions to help entrepreneurs convert viewers into customers.

These business owners believe that it’s easier to sell through an existing marketplace than to build an e-commerce shop. They enjoy the ability to leverage Amazon’s captive audience as well as being able to reach them through ads.

More of Amazon’s value propositions

It’s difficult to make an exhaustive list of Amazon’s value proposition as the company targets a variety of audiences with a lot of different products.

These range from Amazon self-publishing to Amazon Fresh to Amazon Music.

Breaking down Amazon’s business model

Amazon’s business model is very complex and it moves around a few building blocks.

amazon-business-model — 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.

Indeed, when looking at Amazon’s business model it’s easy to conclude that is just an e-commerce company. And indeed, e-commerce is the largest revenue stream.

However, there are a few things to take into account.

First, it’s important to distinguish between scale and profitability. When it comes to scaling, the e-commerce side of Amazon is the most important part.

E-commerce runs at very tight margins, and it offers the possibility for third-party stores to host their products on top of Amazon.

Thus, e-commerce has been built as both a consumer (where billions of people can find anything) and B2B (where other merchants can build their stores on top of Amazon) platform.

Second, over the years, Amazon has experimented with many things, and among them, programs like Amazon FBA, Amazon Prime, and Amazon Advertising turned into successful business units.

Third, as a side effect, trying to make an order to the “jumbled mess” that had become Amazon’s underlying infrastructure, the company came up with a set of dedicated servers, which would eventually become AWS.

AWS, initially used as an internal service, within Amazon, to enable third-party stores to host their e-commerce on top of Amazon, eventually grew to become a dedicated service, for other startups.

AWS pretty much powered up a good chunk of the sharing economy of the 2010s, with companies like Airbnb or Netflix, relying on it to build their own infrastructure.

When for the first time, Amazon opened up the numbers of AWS, in 2015, it became clear, that AWS had become a company within Amazon, and indeed the most successful one.

Not by chance, eventually, the CEO of AWS, which most run it independently, Andy Jassy, eventually became the CEO of Amazon!

amazon-revenues — 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.

Key Highlights

Amazon’s Mission and Value Propositions:
- Amazon’s mission: “to be Earth’s most customer-centric company.”
- Commitment to offering the lowest possible prices.
- Ability to tailor value propositions to diverse target customers and markets.
Suite of Value Propositions:
- Evolution from an online bookstore to offering a diverse suite of value propositions.
- Strategic acquisitions and internal developments to serve distinct customer segments.
Customer-Centric Approach:
- Unwavering commitment to customer satisfaction.
- Investment in understanding customer needs and preferences.
- Seamless and satisfying customer experience from browsing to delivery.
Kindle: Targeted Convenience for Avid Readers:
- Designed for avid readers valuing convenience.
- Vast selection of downloadable books.
- Lightweight and portable reading experience.
Prime: The Epitome of Convenience:
- Focus on fast-paced, convenience-seeking customers.
- One-day delivery and exclusive membership benefits.
- Enhanced value proposition with Amazon Video and Kindle Unlimited.
Marketplace: Empowering Business Owners:
- Empowers business owners to expand reach and increase sales.
- Tools like Reviews and Questions to build trust and facilitate conversions.
- Leveraging Amazon’s massive customer base for growth.
Diverse Value Propositions:
- Multiple value propositions catering to various audiences.
- Includes self-publishing, Amazon Fresh, and Amazon Music, among others.
Amazon’s Business Model:
- Complex and diversified business model.
- E-commerce as the largest revenue stream.
- Diversification into successful ventures like Amazon FBA, Amazon Prime, Amazon Advertising, and AWS.
AWS Success:
- AWS started as an internal service for e-commerce.
- Evolved into a dedicated service for startups and enterprises.
- Played a pivotal role in powering the sharing economy.
- Andy Jassy’s transition from AWS to Amazon CEO underscores its significance.