If you’ve ever bought something from Amazon and wondered how a company that sells so much third-party stuff makes so much money, you are not alone. In fact, Amazon is notoriously secretive about how they make their money. There are definitely more streams of revenue that anyone can possibly imagine, and the rest is likely volume. After all, pennies a transaction when you are talking about millions of transactions a day can really add up fast. It really does boggle the mind to think about how Amazon makes its money.
Amazon’s market value is about twice that of all eight leading traditional retailers combined. When you’re talking about a company that is an infant when compared to aged retailers like Sears and Macy’s, the volume of sales it took to get to grow so big so fast starts to come into perspective. If Amazon keeps growing at this rate it will swallow the retail space in a matter of years.
Amazon got in on the ground floor of e-Commerce. At a time when people were still clinging to the idea of brick and mortar stores being the preference forever, many people didn’t think this internet fad would ever really take off. Amazon made a bold bet that it would, and the rest is history.
One of the smartest moves that Amazon ever made was to focus on the customers. Amazon cares more about making it easy on customers to buy things than other retailers did at the time, which turned out to be revolutionary. The introduction of the Prime membership gave people a one stop shop where shipping would always be free and there was even a bonus of live streaming television and movies included. Hooking customers on the smile box was one of the smartest things Amazon ever did to win market share.
Amazon also focuses more on growth than on sales, which leads them toward capturing more and more categories from consumers all the time. And they also aren’t afraid to fail – on the tail of their failed phone came Alexa, a wild success.
Sellers on Amazon also do a lot of the work for the retailer, selling things that Amazon could never sell on its own in a profitable way. This partnership allows Amazon to sell things that you can’t find anywhere else. But seller beware – Amazon can giveth, and Amazon can taketh it away.
Learn more about how Amazon makes its money from this infographic!