1994-2005: in the early day Amazon, through the vision of Jeff Bezos was among the most prominent Internet players. Amazon had placed substantial bets on various companies and it had quickly scaled its operations. Starting from books, by the late 1990s, Amazon had already expanded into other categories, and Jeff Bezos had placed investments in various Internet startups. As the dot-com bubble burst, though, Amazon not only lost substantial amounts of money into failed bets (the epitome of that was the bankruptcy of Pets.com one of the key bets the company had placed) but it shrank in value, and many analysts predicted its demise. However, in those years, especially in the early 2000s Amazon changed its business playbook. It cut all the investments in things it could not directly control and it started to move from an e-commerce company to a platform business model.
2005-2015: By the mid-2000s Amazon had set the stage for a complete change in its businessmodel. The company had also started to experiment with various programs and products. Some were a complete failure (like the Kindle Fire Phone) and others would turn out into incredible products, and business segments (Amazon Prime, Amazon Advertising, and Amazon AWS).
2015-2020: By the year 2015, Amazon had turned into a tech giant already, and it showed the world, finally, that not only it had survived but that it had the ability to scale at an international level. In these years, Amazon showed the world the incredible numbers behind Amazon AWS (most business players were astonished and other companies like Microsoft and Google started to double down on cloud computing as they saw the success of AWS). And the company managed to expand in Europe, Mexico, and India and tried hard also to break into China.
Amazon’s e-commerce is a two-sided marketplace, with sellers on the one hand, and consumers on the other hand.
Third-party sellers are prompted to host their stories on top of Amazon’s infrastructure, thus enabling them to expand their distribution and leverage Amazon’s fulfillment capabilities.
Thus, I also defined Amazon’s e-commerce as a B2B2C. Indeed, it leverages other businesses (third-party sellers) to revamp its product offerings to consumers.
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.
As of 2021, AWS contributed to most of Amazon’s operating income.
While Amazon is still profitable without AWS, AWS contributes to most of Amazon’s operating profits.
In 2021, Amazon generated almost $25 billion in operating profits. However, if you removed AWS, Amazon would have reported an operating profit of just over $6 billion.
And a surprising thing happened in Q3 of 2022, where Amazon without AWS would have posted a substantial operating loss.
In Q3 2022, Amazon would have posted an operating loss of almost $2.9 billion without AWS’s contribution to the overall operating income of $2.5 billion.
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.
