How Amazon Makes Money

Ravi_Makhija

Amazon is the largest online retail company on this planet.

Some of the core operations of amazon.com include the following.

  • E-commerce operations.
  • Cloud services.
  • Groceries.
  • Prescription medicines.
  • Digital advertising.

It also focuses on the highly intuitive Alexa personal assistant, movies, and TV series through the Amazon Prime Video platform.

However, the primary source of Amazon’s revenue is retail.

It also earns money through subscriptions, web services, and others.

Do you still want to know how this humongous conglomerate earns its money?

The following analysis will let you know how much money Amazon makes from different verticals.

Detailed analysis of Amazon’s revenue stream

Here we have shared with you seven broad revenue verticals that fuel this gigantic enterprise.

Online Store

The online retail store of Amazon is the most profitable amongst all its revenue streams.

Amazon has managed to create an online retail store where you can buy virtually everything with the click of your mouse or swipe of your finger.

In the financial year 2019-2020, the retail store of Amazon raked in $163 billion of net sales.

This value is more than all other verticals of Amazon combined.

The amazing experience, a diverse range of products, and amazing shopping experience has made them the uncrowned king of the online retail sector.

Third-party selling services

Amazing offers a powerful platform for sellers and vendors to sell their products through their Amazon account.

Small businesses can leverage the reach of Amazon’s online retail store to sell their products to a larger audience.

The third-party sellers use their Amazon account to sell new, refurbished, second hand, and collectible merchandise.

They have to pay a fee and shipping charges to Amazon.

This vertical of Amazon has made a sale of $ 63 billion in 2019.

This is 19.7% of the total sales made by Amazon in the year 2019-2020.

Amazon Web Services

Amazon Web Services (AWS) is another strong revenue source for this retail giant.

A range of companies and governments uses this cloud computing service.

The services provided in this vertical include analytics, networking, data storage, cloud computing, and many more.

In 2019, Amazon Web Services controlled 31.5% of the entire world cloud infrastructure services vendor market.

In 2019-2020, the sales figure of this vertical touched $ 40 billion.

Some of the important cloud services offered by Amazon include the following.

  • Amazon S3.
  • Amazon Elastic Compute Cloud (EC2).
  • AWS Lambda.
  • Amazon Glacier.
  • Amazon SNS.
  • Amazon CloudFront.
  • Amazon Elastic Block Store (EBS).
  • Amazon Kinesis.
  • Amazon VPC.
  • Amazon SQS

Subscription Services

Amazon’s subscription service is another profitable venture for this company.

This vertical of Amazon has made a sale of approximately $ 22 billion last year.

As the name suggests, if you want to avail of any of the services offered by Amazon under its subscription service vertical, then you have to pay a fee.

Some of the popular subscription services offered by Amazon include the following.

  • Amazon prime.
  • Prime student.
  • Prime Video.
  • Amazon music.
  • Kindle Unlimited.
  • Audible.
  • Magazine subscription.
  • Subscribe and save.
  • Amazon family.
  • Free Time Unlimited.
  • Amazon STEM club.
  • Amazon Fresh and pantry.

Physical Stores

Amazon not only has a stranglehold on the online retail market, but it also has a chain of physical stores spread all over the world.

These physical stores, though not in that category of Amazon retail store in terms of sales figure and scale of operation, still managed a respectable $ 17 billion of sales in 2019- 2020.

At present Amazon has seven different kinds of physical stores that were opened to capitalize on the renewed interest of its customers in brick and mortar stores.

Some of the physical stores of Amazon include the following.

  • Amazon Go.
  • Amazon Go Grocery.
  • Amazon Books.
  • Amazon 4 Star.
  • Amazon Pop-up.
  • SUB-TOTAL.
  • Whole Foods.

Amazon Advertising

In the year 2020, the Amazon advertisement service is projected to earn a revenue of $ 12.75 billion.

This amount shows a healthy 23.5% growth year-on-year despite the impact of Covid 19.

The sponsored ad vertical of Amazon allows businesses to give high visibility placement on Amazon product pages.

Amazon has different categories of advertising services that include the following.

  • Sponsored products.
  • Sponsored brands.
  • Sponsored displays.
  • Stores.

As businesses are increasingly using online platforms to sell their products, the revenue generated from this vertical of Amazon is going to go up significantly in the coming years.

Others

This category includes co-branded credit cards and is worth quite a lot.

In this segment, Amazon has launched credit card services in partnership with banks and non-bank lenders.

The company offers a heavy discount for those who use these co-branded credit cards to buy any items from their retail store.

Conclusion

In conclusion, the information that we have shared with you shows how this behemoth has spread its tentacles in various sectors.

Amazon has managed to get to this pole position because, since its start, it has kept a razor-sharp focus on its customers’ needs.

It has diversified its operations and invested in innovative ideas to gain new market access.

It has helped the company to create a steady stream of revenue that runs into billions of dollars.

Lastly, if you plan to develop an app like amazon, you have to follow a streamlined process. To know about this process, check this comprehensive guide on how to make an online shopping app? 

By following the detailed process in this guide, you can create an eCommerce app like amazon without any hindrance.

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