Amazon Business Model: 4 Ways Amazon Makes Money And How Much Money Does It Make?

In 1994, a successful hedge fund executive on Wall Street launched Amazon with the goal of delivering books to people around the world. His name is Jeff Bezos, and his company has become an influential force in the era of e-commerce and product development.

While Amazon’s success is now widespread, it has not always been that way. Critics have strongly criticized its legitimacy in the early years of the business, citing its inability to compete with established booksellers like Burns and Noble in the long run.

Although the Nassars criticized the company, Bezos realized the huge potential of Amazon with the advancement of the Internet. Its “Get Big Fast” slogan coincides with its name because Amazon gained 180,000 subscribers in the first year of its operations and 1 million the following year in 1997.

Bezos and his associates took Amazon to unimaginable heights, earning $ 148 million in 1997 and $ 610 million in 1998. With a massive increase in capital, Amazon expands around the world and launches retail, Kindle reading and electronics through massive acquisitions and investments. Let’s take a look at the company Types of business models Amazon follows and breaks their income.

Revenue breakdown

How Much Money Does Amazon Make?

According to the information generated by Statesman, Amazon achieved annual net sales revenue of $ 280.52 billion in 2019 and $ 469.82 billion in 2021. This is a huge increase in annual income, but it is not surprising. Over the past decade, Amazon’s annual revenue has grown by about 25-30% per year.

Based on Amazon’s Q4 FY 2021, revenue has been categorized into different categories. Insider Intelligence, A popular research analytics and marketing firm, has pinned online sales as the number one revenue stream, earning $ 66.08 billion through actual and digital product transactions. Third-party vendor services are second with 30.32 billion and Amazon Web Services (AWS) is third with 17.78 billion. AWS is a public cloud infrastructure spread across 26 regions worldwide, growing by 40% year on year. The remaining revenue streams include advertising services, subscription services and physical stores, generating 9.72 billion, $ 8.12 billion and $ 4.69 billion, respectively.

1. Online retail

4 In FY 2021, online stores generated $ 66.1 billion, or 48% of Amazon’s net sales. Retail can be further divided into two geographical divisions – North America and International. North America generates 60% of Amazon’s net retail sales, while International generates 27%. Nevertheless, it proves that Amazon has maintained a strong presence around the world.

In North America, online retail sales generated $ 92.4 billion in Q4. It is important to note that this segment posted an operating loss of $ 2.9 billion in the year-ago quarter. However, a large portion of Amazon’s revenue compensates for these losses.

2. Amazon Web Services (AWS)

Amazon’s success can be attributed directly to its highly developed online infrastructure that makes it easy to deliver applications and products to customers. During its expansion in 2006, Amazon introduced AWS to provide businesses, organizations, and government agencies with solutions to content distribution, hosting applications, and many other challenges.

Of the $ 17.8 billion in net sales from AWS, জন্য 5.3 billion accounted for operating income; In fact, it is responsible for most of the company’s operating income.

3. Third party seller

Amazon Marketplace was launched in 2000. Since then, third-party vendors have become an influential force in Amazon’s revenue. Third party vendors generate revenue using the company’s online services and offset losses from the initial sales stream. Vendors make full use of the Amazon service, which brings products directly to customers through a central source (Amazon).

This segment of Amazon has multiplied in recent years. In 2020, Amazon saw a 50% increase in third-party vendor services compared to 2019, equivalent to about $ 80.5 billion in net sales.

4. Subscription services and physical stores

While the lion’s share of Amazon’s generated revenue comes from the three primary categories, there are a plethora of other services that create revenue streams for the company. In 2021, subscription services and physical stores generated Amazon’s revenue of $ 8.12 billion and $ 4.69 billion, respectively. Made by Amazon Subscription business model One of the most successful in the world.

Subscription services include Amazon Prime, audiobooks, e-books, digital music and more. Prime allows customers to pay an annual fee for free shipping on a variety of products. This enables consumers to get shipments as fast as one day. With over 200 million subscribers worldwide, Prime has undoubtedly added to Amazon’s already diverse revenue streams. Interestingly, Amazon is raising the cost of its prime service from $ 12.99 to $ 14.99 per month to raise workers’ wages and compensate for transportation costs. Its impact on revenue has not yet been determined.

According to Marketplace Pulse, a popular e-commerce intelligence firm, revenue from these services grew 15% year-on-year in the fourth quarter of 2021. These services expand Amazon’s audience and enable it to provide multiple services and products to customers at the same time.

There is only physical store behind the subscription service. Retail stores include Amazon Fresh, Amazon Go, Amazon Books and more. In 2021, net sales from physical retailing were $ 17 billion. In 2018, Amazon has taken a bold step to acquire Whole Foods Market. For reference, Whole Foods Market earned more than 16 billion in 2017 before its acquisition by Amazon.

Impact of COVID-19 on Amazon Revenue

Unfortunately, many businesses have struggled to generate sufficient revenue to maintain healthy profit margins during the ongoing COVID-19 epidemic. However, Amazon has performed well; In fact, 44% of US Amazon Prime members bought food or drink on Amazon in April 2020. Isolation of consumers has increased the need for food. This trend continues in 2022 and shows no signs of slowing down.

Thomas Martin

Tom is a member of the editorial team at Startup Mindset. She has over 6 years of experience writing on business, entrepreneurship and other topics. He focuses on online business, digital publishing, marketing and ecommerce startups.

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