Amazon Business Model

Virginia Rosales
AnabelJuárez
Jaime Millán
Vladimir Matović
October 2010
Business Models: Themes and Issues

- from A to Z
Company Overview
Mission, Vision & Values
Core Value Proposition, Objective & Strategy
Three Customer Sets
Attention Economy and e-Trust
Business Model
Amazon.com Business Model Evolution
Business Model Canvas – The 9 Building Blocks
eBook/Kindle
Value Capture
Diversifying Revenue Streams
Geographical Expansion & Product Range
Amazon.com Acquisitions and Investments
Sales
Conclusion
Sky is the limit
References

Company Overview

Strategy
Source: www.amazon.com

Three Customer Sets
Who want to buy products on Amazon
Consumers
Who want to use Amazon developing services
Who want to sell products on Amazon
Sellers
Developers

- from A to Z
Company Overview
Three Customer Sets
Business Model
eBook/Kindle
Value Capture
Sales
Conclusion
Sky is the limit
References

e-Trust
Brand Differentiation
Customer Loyalty
How long do you stay @ ?
GOAL:
Attentionattraction and retention
Customer’s needs
Relevant Content
Frequent Update
Buying habits
Reactions to Web site design
Demographics
Favorite and least favorite products
HOW?
Quality
Value
Timeliness
Appropriateness of Goods & Services
Business Reputation
Security in Transactions

How long do you stay @ ?
Stickiness
Holds customers and keeps them coming back for more!
Measurement: *Time spent at a website
*Number of visits per person
*Number of pages viewed

Content
Products &
Services

Interactivity &
Production Values

Co-Creation &
Recognition
Personalization
Customization
Ownership &
Belonging

Variety
2
Easy
Navigation
1
3
4
5
Speed & Delivery

- from A to Z
Company Overview
Three Customer Sets
Business Model
eBook/Kindle
Value Capture
Sales
Conclusion
Sky is the limit
References

1995
Business Model Evolution
1999
OnLine Book Retailing
2000
Auctions & zShops
Marketplace
2001
Partherships
&
Logistic Services
E-commerce Platform/
Web Services
2002
2007
eBooks/Kindle
2010

Business Model Canvas9 building blocks
Value Proposition
(VP)

Business Model Canvas
eBooks/Kindle
E-commerce Platform/Web Services
Online Retailing
Auctions & zShops
Partnerships and Logistic Service Provider
Marketplaces
AUTOMATED SERVICES & CO-CREATION (CUSTOMISED ONLINE PROFILES & RECOMMENDATIONS)
LOW PRICES
CONVENIENCE
WIDE SELECTION
CUSTOMER EXPERIENCE
GLOBAL MARKET (CONSUMERS)
LOGISTIC PARTNERS
AFFILIATES (PUBLISHERS, AUTHORS, BOOKSTORES…)
FULFILMENT & IT INFRASTRUCTURE DEVELOPMENT AND MAINTENANCE
GLOBAL MARKET (SELLERS & CONSUMERS)
INTERMEDIATION SERVICES
PRODUCT DEVELOPMENT, AND PROMOTION
PARTNERSHIPS & ALLIANCES
SELLERS (COMPANIES & INDIVIDUALS)
AGGREGATION OF DEMAND (LONGTAIL)
HARDWARE MANUFACTURERS
COMPANIES (ONLINE & TRADITIONAL RETAILERS)
AMAZON.COM (& OVERSEAS SITES)
AFFILIATES
FULFILMENT
IT INFRASTRUCTURE, SOFTWARE & EXPERTS
GLOBAL FULFILMENT INFRASTRUCTURE
COMPANIES (ONLINE & TRADITIONAL RETAILERS)
MASS-CUSTOMISED WEB SERVICES
DEVELOPERS
LOGISTICS NETWORK
PORTABLE DEVICE
APIs
MARKETING
TECHNOLOGY & CONTENT
FULFILMENT
SALES MARGINS
COMMISSIONS

eBooks/Kindle
Amazon reported 80% of eBook market
>450 000 books available for download
Kindle eBooks add 35% to a physical book’s sale on Amazon
Newspapers, magazines and blogs subscription
eBooks downloaded from Amazon not exclusive to Kindle
Amazon keeps 65% of the revenue from all eBook sales for Kindle
"Our vision is to have every book ever printed, in any language, all available in tinder 60 seconds.“
- Jeff Bezos, Amazon.com CEO

Capture Value:transforming earnings into profits
Maximize Profit Dollars,
Not Margins

- from A to Z
Company Overview
Three Customer Sets
Business Model
eBook/Kindle
Value Capture
Sales
Conclusion
Sky is the limit
References

Source: www.meettheboss.com

z
Worldwide Sales Mix
Q4 ’09– Net Sales $24,509 MM
Q1 ’04 – Net Sales $5,710 MM
2%
3%
22%
45%
76%
52%
WW Media (Books, Music, Movies, Video Games and Consoles, Software
and Digital Downloads)
WW Electronics & Other General Merchendise (EGM)
WW Other (Marketing and Promotional Activities, Amazon Web Services, Amazon Enterprise Solutions, & Co-branded Credit Cards)

International Sales
MM
• 2008 International sales 47% of WW sales, up from 45% in 2007
• Shipments to over 200 countries

- from A to Z
Company Overview
Three Customer Sets
Business Model
eBook/Kindle
Value Capture
Sales
Conclusion
Sky is the limit
References

Conclusion
How do you explain the BM Evolution
B2C and B2B
Amazon’s BM evolution followed a logical path taking advantage of the resources, channels and knowledge previously built to create and/or innovate
Why Expansion of product range
Enter different markets, use the strength of the brand to expand,
“easy” to replication over different products (using same resources) and geographical areas
Better margins
Generate revenue and sustainability at its core
“Earth’s biggest selection”
How Attention economy explains business model
Attention = currency, community stickiness tactic
Trust the company
Easy to navigate and frequent updates
3 pilars: Convenience, price & wide selection
Weaknesses Amazon vs. eBay (Why)
E-bay had the advantage of the first mover on e-auctions. Customers expected rapid response. Different kind of customers.

Conclusion

Sky is the limit

Thank you!

References
Websites:
www.amazon.com
www.youtube.com
www.charlierose.com
www.meettheboss.com
SOLOMON D. 2009. Questions for Jeffrey P. Bezos: Book Learning. Available at:http://www.nytimes.com/2009/12/06/magazine/06fob-q4-t.html " [22.10.2010].
Articles:
2006. From Niches to Riches: Anatomy of the Long Tail. MIT Sloan Management Review, 47, 67-71.
2008. Amazon.com: The Brink of Bankruptcy.
ANTE, S. E. 2009. HOW AMAZON IS TURNING OPINIONS INTO GOLD. BusinessWeek, 047-048.
DAVENPORT, T. H. & BECK, J. C. 2000. GETTING the ATTENTION You Need. Harvard Business Review, 78, 118-126.
HOF, R. D. 2003. Reprogramming Amazon. BusinessWeek, 82-86.
KIRBY, J. & STEWART, T. A. 2007. The Institutional YES. (cover story). Harvard Business School Publication Corp.
MUDAMBI, S. M. & SCHUFF, D. 2010. WHAT MAKES A HELPFUL ONLINE REVIEW? A STUDY OF CUSTOMER REVIEWS ON AMAZON.COM. MIS Quarterly, 34, 185-200.
O'BRIEN, J. M. & SHAMBORA, J. 2009. AMAZON'S NEXT REVOLUTION. (cover story). Fortune, 159, 68-76.
PENENBERG, A. L. 2009. The Evolution of Amazon. (cover story). Fast Company, 66-74.
TONKERY, D. 2010. Amazon Versus Ebook Publishers. Searcher, 18, 41-43.
ZMUDA, N. 2009. AMAZON SAYS 'I DO' TO ZAPPOS. NOW WHAT? Advertising Age, 80, 4-4.
Books:
DAVENPORT, T. and BECK, J., 2001. The Attention Economy, Understanding the New Currency of Business. 1st ed. United States of America: Harvard Business School Press
DEMAIO, H., 2001. B2B and Beyond, New Business Models Built on Trust. 1st ed. United States of America: John Wiley & Sons
OSTERWALDER A. and PIGNEUR Y., 2010. Business Model Generation, Hoboken: John Wiley & Sons
SPECTOR, R., 2000. Amazon.com: Get Big Fast. London: Random House Business Books

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Amazon Business Model

by Vladimir Matovic on Nov 01, 2010

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