Amazon’s attractive value proposition boosts growth but hurts profitability - Amazon pursues an hyper-growth strategy (29% per year since 2005) based on innovation and pricing to dominate e-commerce and disrupt retail. Most of the value is transferred to customers resulting in a very attractive and distinctive proposition. On the other hand that strategy puts a hefty cost burden on business, crushing operating profits.

1. Axioners Strategy Consulting - © 2018
Third-party seller services
Physical stores
Overhead
Online stores
Operations
Cost of sales
Other
Subscription services
AWS
(%)
Total revenues
Operating income
-112
-174
(-98%)
-70
(-39%)
4
-4
178
-58
5
18
61
5
6
108
2
17
10
32
-2
3
3
10
-33
-63
100
Amazon pursues an hyper-growth strategy based on innovation and pricing to dominate e-commerce and disrupt retail. Most of the
value is transferred to customers resulting in a very attractive and distinctive proposition. On the other hand that strategy puts a
hefty cost burden on business, which crushes operating profits.
Operating income breakdown (2017)
($Billions)
Sources : Financial statements
Amazon’s attractive value proposition boosts growth
but hurts profitability
2018-02 #1- Axioners Strategy Consulting - © 2018
www.axioners.com
Operating margin against revenues
8 11 15 19
25
34
48
61
74
89
107
136
178
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
5,1%
3,6%
4,4%
4,4%
4,6%
4,1%
1,8%
1,1%
1,0%
0,2%
2,1%
3,1%
2,3%
($Billions)
• Revenues CAGR (compound annual growth rate) is 29% since 2005
when Amazon Prime was launched
• Amazon runs on razor thin operating margin since 2011
• Online stores account for 61% of the revenues in 2017