Amazon is one of the largest and most successful e-commerce companies in the world. Founded by Jeff Bezos in 1994 as an online bookstore, Amazon has grown to become a multinational technology company that offers a wide range of products and services to its customers. In this article, we will explore how Amazon makes money.
- Online Retail
Amazon’s primary source of revenue comes from its online retail business. Amazon operates several online marketplaces, including Amazon.com, Amazon.co.uk, and Amazon.de, where customers can purchase a wide range of products, including books, electronics, clothing, home appliances, and more.
Amazon makes money through several revenue streams within its online retail business. The first is the commission it charges third-party sellers for selling their products on the platform. Amazon charges a commission fee of between 6% and 45% of the product’s sale price, depending on the category.
In addition to the commission fee, Amazon also charges third-party sellers fees for other services, such as storage, shipping, and advertising. Amazon also sells its own products on the platform, including AmazonBasics, an Amazon-owned brand that offers a range of consumer products, from electronics to household essentials.
- Amazon Web Services (AWS)
Amazon Web Services (AWS) is a cloud computing platform that provides a range of services, including computing power, storage, and databases, to businesses and individuals. AWS is one of the largest cloud computing providers globally, with over a million active customers.
AWS generates revenue through a pay-as-you-go pricing model, where customers only pay for the services they use. AWS also offers a range of other services, such as data analytics, security, and machine learning, which generate additional revenue for the company.
AWS has been a significant revenue contributor for Amazon, with the division accounting for over 12% of the company’s total revenue in 2020.
- Subscription Services
Amazon offers several subscription services that generate revenue for the company. The most popular of these services is Amazon Prime, a subscription-based service that offers customers free shipping, access to streaming services, and exclusive discounts.
Amazon Prime costs $119 per year in the United States and is available in several countries globally. Amazon also offers several other subscription services, including Amazon Music, a music streaming service, and Amazon Kindle Unlimited, a subscription service that provides access to over a million books and magazines.
- Advertising
Amazon has developed a significant advertising business that generates revenue for the company. Amazon’s advertising platform allows businesses to advertise their products on the Amazon platform, including on product pages, search results, and other areas of the site.
Amazon generates revenue through a pay-per-click advertising model, where businesses only pay when a customer clicks on their ad. Amazon’s advertising business has been growing rapidly and accounted for over 7% of the company’s total revenue in 2020.
- Physical Stores
Amazon has been expanding its physical store presence in recent years, including the acquisition of Whole Foods Market, a natural and organic grocery store chain, in 2017. Amazon has also opened several Amazon Go stores, which offer a cashierless shopping experience to customers.
Amazon generates revenue from its physical stores through the sale of products and services, including groceries, prepared foods, and other consumer products. Amazon also uses its physical stores as a distribution network, allowing customers to pick up their online orders from these locations.
- Other Revenue Streams
Amazon has several other revenue streams, including Amazon Marketplace, a service that allows businesses to sell their products on the Amazon platform, and Amazon Fresh, a grocery delivery service that delivers fresh produce and groceries to customers’ homes.
Amazon also offers a range of other services, including Amazon Home Services, which provides customers with access to professional services such as cleaning, plumbing, and electrical work.