How does Amazon Make Money?

Amazon is a world-leading e-commerce platform today. Its business model offers e-commerce services to both individuals and corporate clients. Since in inception in 1994 as an online bookstore, the company has evolved a lot.

Today, it incorporates business in e-commerce, SAAS, web services, streaming and music, and advertisement business, to name a few.

Amazon Business Model

Amazon is the largest online retailer globally, with more than 150 million prime users and 230 million website visitors in the US alone. Its business model offers direct sales to retail and corporate customers.

Amazon sales to its retail clients include:

  • E-commerce products and services
  • Sales through its physical stores and outlets like amazon fresh
  • Amazon Web Services (AWS)
  • E-books and publishing on kindle
  • Amazon App store and software
  • Amazon live streaming and music prime
  • Amazon-branded products like Fire tablets, Echo, and Alexa.

Amazon also offers a comprehensive business model for its corporate clients. There are several partner programs offered by amazon that both retail and business customers can join.

Some of the key Amazon partner programs include:

  • Amazon selling partner program
  • Amazon business for B2B sales
  • Amazon self-publishing for e-books
  • Amazon ignite for digital educational materials
  • Amazon merchandise and handmade programs
  • Affiliate and Influencer programs
  • Amazon Flex and Delivery partner program
  • App Store, AWS, and Alexa Skills program
  • Earning with gaming on Twitch
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Amazon’s global reputation as a global retailer giant is fast evolving into a global conglomerate. It currently holds more than 40 subsidiaries and offers more services each day than earlier. It has become a leading market player in cloud storage, software as service (SAAS), and other web services sectors.

Amazon’s comprehensive list of products and services means it has multiple sources of income. As with each large company, it isn’t easy to evaluate the proper income sources attributable to each section.

How Amazon Makes Money?

Let’s say how Amazon actually makes money. Amazon sells the products directly to its customers as well as with third-party partner programs. It generated record revenue in the current financial year due to a pandemic caused by home restrictions.

More people turned towards online shopping, live streaming, and stay at home activities, which all contributed towards increased revenues for amazon.

Amazon reported $ 260.509 billion of revenue for the third quarter ended in September 2020. Its net profits amounted to $ 14.109 billion for the same quarter. It isn’t easy to categorically attribute income sources against each of the amazon product or service category.

Amazon divides its sources of income into SIX broader categories. It’s each business segment generated sales for the latest quarter is as below: (all figures in Millions)

  1. Online Stores                                                  $130,899
  2. Physical outlets                                              $12,201
  3. Third-party seller services                           $53,121
  4. User Subscriptions and Memberships      $18,146
  5. Amazon Web Services                                   $32,628
  6. Other miscellaneous categories                 $13,514
  7. Total Sales for the quarter                           $260,509

Let us elaborate on each of these income sources in detail.

Online Stores

These sales account for both retail and corporate e-commerce activities. Online selling revenue also includes the purchase of all e-commerce products. It excludes digital downloads and subscriptions though.

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Physical Outlets

Amazon’s physical outlets mainly include sales through its subsidiaries like Amazon Fresh stores, Whole Food Market, Zappos, and Shopbop.

Third-Party Selling Revenue

As Amazon describes it, it includes selling commission, handling charges, profit margins, etc. Both individual and business customers with Amazon pay monthly fees as well as other costs. Sellers with fewer than 40 sales monthly pay $0.99 per item, and Sellers with more than 40 monthly sales pay for $39.99 per month charges to amazon.

User Subscriptions and Memberships

It mainly drives sales through amazon prime service fees. Other subscriptions include Amazon Live streaming, E-books, and other digital service subscriptions.

Amazon Web Services

Amazon offers comprehensive cloud storage and web optimization services to its global customers. These services include cloud computing, storage, database and transfer, networking, and content delivery services.

Others Category

Amazon’s other category revenue is mainly derived from the advertisement charges. The online advertising industry is rapidly accelerating as more and more customers are adopting online mediums.

Social media networks and streaming networks are the biggest sources of online advertisements. Likewise, amazon’s publishing and live streaming platforms are its comprehensive income sources.

The Geographical Income Sources for Amazon

Amazon’s web services (AWS) and other digital products are offered globally. However, it mainly divides its revenue streams into three categories—all figures as of the last financial quarter ended September 2020.

Sales SourceSales in Millions
North America$ 160,936
International$ 66,945
AWS$ 32,628
Total Sales$ 260,509
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