The success behind Amazon, 2022 Business Model Canvas.
My name is Ahmet Akif, a graduate in Economics and Business Management, currently embracing the role of a Software Developer Trainee at Architecht. I am eager to present an analysis I conducted on Amazon, which formed a crucial part of my final examination in one of my advanced courses. This analysis encapsulates a comprehensive examination of Amazon’s business strategies, market dynamics, and financial performance, reflecting my academic proficiency and practical insights in the field.
Company Overall
Amazon.com, Inc. is a Washington-based e-commerce, cloud computing, AI-focused multinational American technology company. It is considered one of the Big Tech along with Google, Apple, Microsoft, and Facebook. Also, the company is referred to as “one of the world’s most influential economic and cultural forces” and “one of the world’s most valuable brands”.
The company was founded by Jeff Bezos on 5 July 1994 in Bellevue. The company first focused on selling books online and it created a unique marketplace for bookselling. But, after high interaction, the company wanted to use the advantage and started to sell electronic products, then video games, clothes, furniture, food, toys, jewelry, etc. In 2015, the company passed the biggest and the most valuable retail company, Walmart, in terms of market cap. Amazon wanted to continue its success not only in the e-commerce industry, but also in the physical retail industry, so the company acquired Whole Foods Market for $13.4B which allowed them to expand their operations physically.
In 2018, Bezos announced the company’s two-day delivery subscription service that is called Amazon Prime, and it is reported that there are 200M Amazon Prime subscribers all around the world. The company also joined the Türkiye market in 2018, and after 2 years of market research, began its official operations in 2020 August.
The company has a market cap of $1.55 Trillion as of December 17, 2023. It increased its market cap by 68.14 compared to last year.
Revenue
An interesting tale about Amazon’s revenue streams emerges as one navigates its busy and always-changing environment. Envision an enormous tree, with its branches standing in for the various revenue streams the corporation generates, each adding to its remarkable $554 billion in total revenue.
The e-commerce business model is the core of this tree and its strongest branch. This branch is not just any branch; it’s a powerful one, bringing in an incredible $220 billion annually, or 43% of the company’s total revenue. This is the point of digital magic when the ease of online purchasing and a vast array of products collide.
And not much after that lies the marketplace, a humming bazaar. With a $118 billion, or 23%, contribution to the revenue mix, it is a thriving and diverse hub. Third-party vendors contribute their distinctive goods here, weaving a tapestry of possibility and choice.
Not to be overlooked is Amazon Web Services (AWS), the engine that powers a plethora of businesses, both large and small. With its state-of-the-art technology, this branch may only contribute 15%, or $80 billion, but it has a huge impact on enterprises all over the world.
The $38 billion contribution from advertising services and the $38 billion contribution from subscription services account for 7% of total revenue. Even though they are smaller, these branches are essential because they use creative advertising techniques and a variety of alluring subscription alternatives to generate a consistent and predictable flow of revenue.
Even the actual stores, which pay homage to the conventional retail setting, have a role to play. Even if they only provide $19 billion, or 4% of the total, they help the corporation stay rooted. Furthermore, we must not ignore the ‘Other’ category, which is a wild card that increases the total by $4 billion, or 1%.
This revenue tree’s branches each tell a different tale about strategy, creativity, and the unwavering pursuit of customer happiness. When taken as a whole, they depict a business that is not only surviving but prospering in the fast-paced world of commerce.
Key Partners
Entering the huge and complex world of Amazon, we discover a network of alliances as vibrant and varied as a busy metropolis. The suppliers form the hub of this network, resembling the numerous bustling shops in a marketplace. These providers range in size from small-scale merchants with a wide variety of products to bigger, more well-known brands like Dell and Nike. All suppliers, regardless of size, contribute a distinct element to the diverse range of products offered by Amazon.
Then there are independent artists and craftspeople in a large market who are like third-party dealers. Even though they are not directly involved in the manufacturing cycle of Amazon, they add a distinct value to the marketplace by offering a wide range of products that satisfy every conceivable need and desire.
But it’s its logistics partners that make Amazon’s global operations run smoothly. Imagine an intricate web of roads and highways, teeming with traffic, linking every region on the planet. For example, Amazon works with KolayGelsin in Turkey; this is a transparent and adaptable collaboration. Imagine having the ability to select who delivers your gift, change the delivery date at the drop of a hat, and track it all in real-time. This degree of client-focused care redefines the journey rather than merely being a convenience.
There is no denying the impact of Amazon’s innovative logistical practices. Rivals, spurred on by Amazon’s lead or perhaps forced to do so, have focused on improving their logistics systems, putting HepsiJet and TrendyolExpress front and center.
Furthermore, we must not undervalue the quiet but potent influence of Amazon Web Services (AWS) partners. Consider AWS as the hidden but vital electrical grid of the city, supplying not only Amazon’s technology requirements but also those of numerous other businesses, both large and small. Like a city’s infrastructure, AWS supports the activities, offering a strong and dependable basis for development and innovation.
Every collaborator and partner in this commercial metropolis that Amazon has established serves as a building component, resulting in a constantly changing, vibrant, and opportunity-rich environment. Every player in this world — from the tiniest supplier to the biggest logistical partner — plays a crucial part in telling the Amazon tale.
Key Propositions
For customers, Amazon is like finding a treasure trove because of its cost, ease, and diversity, all of which dazzle. Imagine getting everything you need at costs that frequently outperform those of its competitors, from the newest technology to a rare book. This is because Amazon offers a wide range of goods and services, making it a one-stop shop for customers on a tight budget.
And then there’s Amazon Prime’s magic. Imagine it as your exclusive access to the world of buying, where “quick delivery” means something quite different. Free worldwide shipping is available, and your package will frequently be at your door before you even begin to wonder where it is. One of the main features of Amazon Prime is the guarantee of quick delivery, which makes every purchase an exciting and delightful experience.
However, Amazon offers more than just merchandise. You have access to a vast world of entertainment. With Amazon Prime, you may watch and listen in addition to shopping because you get access to a huge music and video library on Amazon Music and Amazon Prime Video. These services, which are included with your Amazon Prime membership and are always changing to keep interesting and new, provide a world of entertainment for the cost of a single service like Netflix or Spotify.
For vendors, Amazon provides access to a thriving market full of enthusiastic buyers. It’s similar to opening a business in the busiest square in the internet realm, where influence and visibility are unmatched. Amazon serves as a platform for merchants to introduce their goods to a worldwide customer base, making their aspirations of growing their business a reality.
Think of Amazon’s marketplace as a bustling stage with independent sellers as the stars. This vibrant marketplace, where these individual sellers account for more than half of the things sold, is more than simply a feature; it’s a revolution that began in 2002. It’s a thriving ecosystem now, expanding daily. ‘Fulfillment by Amazon’ (FBA) is like having a strong backstage team for these businesses. They store their goods in Amazon’s enormous warehouses, and the online retailer handles everything else — including returns, payments, and shipping. This service is about freedom and flexibility, not just logistics. Through a variety of sales channels in addition to Amazon, sellers can reach a large client base, all with the support of Amazon’s superior infrastructure.
Key Resources
Imagine Amazon as a massive company with a vast array of skills and resources that enable it to lead the industry. The foundation of the company is its extensive IT infrastructure, which powers everything from its massive online retail operations to the advanced cloud services provided by Amazon Web Services. This digital foundation is the brains behind Amazon’s machine learning and artificial intelligence capabilities, which make them a tech behemoth. It’s more than just wires and codes.
However, its people are what make Amazon what it is, human resources. This diversified pool of human talent, which includes both creative and inventive software developers and attentive customer service representatives, is what drives Amazon’s development and inventiveness. Under the direction of forward-thinking executives who set the direction for this business journey, they are the thinkers, doers, and dreamers propelling the organization ahead.
Next, take into account Amazon’s actual physical presence, which consists of a global network of warehouses and distribution centers arranged like a huge web. These are more than simply structures; they are the backbones that allow Amazon to handle an incredible volume of returns and orders with lightning-fast speed.
Last but not least, Amazon’s place in its business strategy is dynamic and ever-changing, much like a chameleon. It serves as a retailer, a cloud service provider, a trendsetter, and more than just an e-commerce platform. These industrial positions and strategic partnerships are the chess pieces that Amazon skillfully maneuvers in the grand scheme of international trade.
Customer Relationship
Amazon has demonstrated a mastery of comprehending and appreciating the client through its customer connection strategy. Fundamentally, personalization takes center stage. Amazon creates a personalized shopping experience in addition to selling goods. It turns a basic search into a journey of personalized product recommendations and focused marketing campaigns by leveraging consumer data, giving each customer a sense of being individually understood.
Customer service is the cornerstone of Amazon’s dedication to its users. Consider it a multi-platform safety net that is dependable, efficient, and constantly there. By ensuring that every connection results in happiness and loyalty, this service strengthens the relationship that exists between Amazon and its consumers.
Within community interaction, Amazon transforms buying into a shared experience. It builds trust and a sense of community through Q&A sessions and evaluations. This is about more than just purchasing and selling; it’s about establishing a community around each product and a place where viewpoints are respected and exchanged.
Low pricing is the cornerstone of Amazon’s customer relationship, of course. Offering continuously low prices helps Amazon not only draw in clients but also forge enduring bonds with them. This approach isn’t just about making sales; it’s also about building a foundation of value and trust so that clients have a good reason to come back.
Channels
Amazon is most known for being a B2C market retail destination. Fundamentally, the website functions as a dynamic link between Amazon and its enormous client base. This is where Amazon’s expertise in data mining and analysis is demonstrated. Every component of the website — including product descriptions, reviews, and sophisticated search and filter functions — has been thoughtfully designed to make each visit simple and unique for customers.
Amazon extends its reach through the convenience of mobile apps in addition to “online platforms.” These are portals to a variety of Amazon worlds, not simply apps. Every touchpoint, from the all-inclusive Amazon app to niche offerings like Prime Video, Prime Music, and the innovative Kindle app, connects users to their needs and interests while they’re on the road.
Next is the innovation seen in physical stores. Entering Amazon’s space here is akin to entering a future retail environment. Imagine shopping in stores that are dotted with cameras and sensors, where you merely need to enter, choose what you want, and then go. These stores smoothly merge the physical and digital worlds as they don’t have checkout lines or registers. Instead, cameras identify you, sensors determine what you want, and your Amazon account takes care of the rest. Its retail reinvented, fusing technology and ease.
Customer Segments
Amazon employs a deft artistic technique to cater to its heterogeneous consumer base, utilizing four separate segmentation types to present a clear image of its audience: geographic, demographic, behavioral, and psychographic.
Geographically speaking, Amazon’s canvas spans more than 100 countries, including both the calm lanes of rural areas and the busy avenues of metropolitan metropolises. The demographics of Amazon’s audience are as diverse as a busy city crowd: it ranges from people of both genders who embrace life’s various stages, such as working professionals or students, to teenagers as young as 14 years old.
In terms of behavior, Amazon treats its clients like old friends. It identifies the “Switchers,” who alternate between possibilities, the “Softcore loyals,” who usually prefer Amazon, and the “Hardcore loyals,” who are Amazon fans. Whether it’s affordability for a student on a tight budget or convenience for a working professional, Amazon meets the specific demands of every group.
Psychologically, Amazon sees individuals from various walks of life in addition to its customers. It resembles a marketplace where people of all socioeconomic classes can find items that are customized to fit their ideals and way of life. Amazon offers a diverse and inclusive buying experience by catering to a wide range of social backgrounds through its product range, which includes both luxury items and everyday staples.
Key Activities
Order fulfillment and logistics are the foundation of Amazon’s business. Envision a well-oiled system that methodically plans the flow of goods from suppliers to Amazon’s warehouses and ultimately to the customer’s door. This is a symphony of inventory management, warehousing, and precision delivery operations that ensures your much-anticipated gift arrives, often as quickly as the same day. It’s not simply about moving boxes.
Then there’s the field of application and website management. In this instance, Amazon acts as a digital architect, continuously enhancing and changing its online appearance. This guarantees a fluid and responsive experience while navigating Amazon’s mobile applications or browsing its website.
Amazon is a leader in the field of cloud infrastructure management thanks to Amazon Web Services. Consider it as supplying the digital building pieces that enable numerous companies and people worldwide, from processing power to data storage.
Ultimately, creating and fostering relationships is at the heart of Amazon’s customer service and relationship management strategies. Every contact — phone, email, or live chat — offers the chance to deepen relationships with clients. Using consumer data, managing comments, and handling returns are all part of a larger strategy to improve the Amazon experience and make every encounter a step closer to a better shopping experience.
Cost Structure
A massive pillar in the overall structure of Amazon’s operations is logistics and warehousing. Envision an extensive system of walkways and warehouses, all carefully maintained. This sector, which saw a startling $83.5 billion investment recently, is the foundation of Amazon’s guarantee for prompt and dependable delivery. Moving products is only one aspect of this cost sector; another degree of complication is added by shifting real estate values.
We then go into the development and upkeep of technology. Being ahead of the curve is not only a goal but also a need in the fast-paced world of big tech. Amazon invests a significant $73.2 billion in this, making sure that its technology foundation is not just robust but state-of-the-art. This isn’t just spending; it’s an investment in the future, encompassing everything from the necessary staff of engineers and IT specialists to software development.
Amazon is a storyteller in the marketing and advertising space, not just a brand. With each dollar invested in this area, Amazon expands the narrative of its brand within the market, drawing and keeping consumers as well as opening up new avenues for the introduction of goods and services. Here is where the relationship with the customer starts, as Prime deals and alluring marketing portray Amazon as more than simply a store; it’s a part of everyday life.
Lastly, Amazon’s true passion is Customer Service and Relationship Management. The goal is to establish a long-lasting relationship with every consumer. Every call, email, or chat is an investment in customer trust and loyalty, which is a vital component of Amazon’s success story. It’s not just a cost of doing business.
Interpretation of the Results
Amazon, a behemoth in the e-commerce industry, has amassed enormous success through a clever business strategy combined with a special kind of technology. The company is more than just an online retailer; at its foundation, it is a leader in data science, using information like a skilled artisan would use his tools. With the help of its strong logistical infrastructure and experience, Amazon can accomplish seemingly impossible tasks, such as transporting large shipments over great distances in a matter of days. This effectiveness is a promise, not just a service, and more than 200 million Amazon Prime subscribers depend on it every year.
However, Amazon has a variety of obstacles to overcome in the worldwide market, especially from regional competitors. Due to its global reach, the corporation is unable to simply implement a one-size-fits-all approach everywhere. Every market is a different puzzle that requires in-depth investigation, knowledge of regional demand, and competition analysis. Because of this, Amazon needs to operate locally in addition to thinking globally.
Imagine the Amazon as a tree that reaches all over the world. Every branch, each representing a distinct nation, has unique requirements and traits. Having a central administration with teams dedicated to different regions and countries is necessary to manage this large network. This structure guarantees relevance and competitiveness in local markets, but it also comes with a set of problems, such as managing expenses, hiring local talent, and striking a balance when anticipating ROI.
Not only is it logistically difficult to manage such a diverse staff, but it also requires a high level of communication and cultural sensitivity. Communication errors can have a cascading effect on the organization and damage its reputation in regional marketplaces. This facet of Amazon’s business strategy resembles a difficult dance in which every move matters and combines global reach and local skill.
