Last night, I was surfing through the internet and was reading about Jeff Bezos and his journey of turning an online bookstore to something we now call Amazon.
I was awestruck by going through some of its achievements and this blog is about what makes Amazon, a giant retail company’s model unstoppable. It is a mix of a retail company as well as a technology company. Unlike a retail company, Amazon seldom hires stock clerks and floor managers. Their employees have high technological skills like data mining etc.
Let us start from the starting.
In 1994, Jeff Bezos established Cadabra, an online bookstore, trying to break into the booming universe of online business. Bezos’ organization focused on offering books. Bezos’ key knowledge was that by working as on online book shop that linked clients specifically to book providers, his organization would be free from the limitations of restricted stockroom estimate, and would have the capacity to stock a few times a larger number of books than customary physical bookshops, and in addition, offering less expensive costs.
After a year, he renamed his organization as Amazon, and by 1997, the company grew till such an extent that its offers were at that point being traded on an open market on the NASDAQ. A few speculators were at first disappointed by Amazon’s captivating marketable strategy, whereby no benefit was relied upon to be made for no less than four years, yet such doubts were cleared in the year 2000 when the same number of its rivals were collapsing as the website bubble burst, but Amazon kept on developing. By 2001, Amazon proved the doubters wrong and went on to become a successful online retail store; this demonstrated the reasonability of Bezos’ plan of action.
From that point, Amazon went from quality to quality, and since 2001, Amazon share costs have soared high, nearly year-on-year, as the organization stretched all around, with a progression of top acquisitions, stretched out into different areas of retail and built up a reputation for being an online business behemoth.
Amazon’s mission is to be the world’s greatest e-commerce hub, letting its consumers access a wide variety of goods.
Let us talk about its Revenue model in brief:
Amazon has a varied revenue model.
- The primary source of revenue for Amazon is the commissions and fees that it gets by making the borrowers and sellers meet. If you’ve ever shopped from Amazon, you’ll know that Amazon doesn’t sell a lot of stuff on its own. It just provides a marketplace guaranteeing a standardized experience for both the buyers as well as the sellers.
- Amazon also derives a huge chunk of its revenues from affiliate programs. Amazon provides affiliates with stores within their sites, and then it charges a meatier commission on their sales.
- Amazon also sells advertising space on its website, which makes sense. The site is one of the most visited pages in any region; hence sellers can expect to boost sales by advertising on it. This doesn’t really count as revenue because the fee charged is quite low when compared to other sources, but is nonetheless adds to their revenue model and is significant.
- Amazon also makes a huge chunk of money from the ‘Kindle’ marketplace. Amazon had developed and sold a device called Kindle which is an e-book with inbuilt books. Thanks to this device, Amazon has a 75% market share in the eBook market. Amazon gets approximately 70% of the revenue generated by selling eBooks on Kindle.
- Lastly, Amazon has also developed a subscription-based business model through its Amazon Prime service. For a fixed subscription, users get two benefits:
- Users can stream movies and other video content via the internet.
- Amazon Prime members get the benefit of lightning-fast delivery of the products purchased from their site.
The revenue model of Amazon is therefore very dynamic. It has been repeatedly venturing into newer areas. Also, technology is the backbone of these newer sources of revenue which many retailers had not thought about earlier.
Amazon keeps on showing a promise to the advancement and changing how we shop. Amazon hints at no backing off, with a giant piece of the overall industry and the assets available.
Amazon faces a wide variety of competition from different types of companies. There are brick and mortar stores. Then there are other e-commerce sites and also video streaming sites like Netflix. However, none of these competitors seems to be challenging. Amazon is the boss in almost all lines of business and is snatching business away from others rather than defending its own turf.
Amazon’s business model seeks a variety of ventures to penetrate in the market and this is what makes it a giant. Talking from a marketing angle, every new venture had been launched successfully with no glitches. The advertisements for kindle were captivating.
The young generation’s shift from watching serials on TV to watching comedy on YouTube caught Amazon’s attention and so they created Amazon Prime as a successful streaming medium. With awareness about Stand-up specials and other general videos, the success rate for Amazon Prime subscription increased by leaps and bounds. Well played Jeff, very well played.
Now, I’m going to binge-watch on some TV shows on Prime.
Wishing you all the success
Jackson A. Robin