Amazon Business Model

This was done as part of a coursework for the Business Model class at Heriot-Watt University.

It was used only in educational services.

I hope you enjoy it and learn something form it, because we certainly learned a lot.

1. V irginia R osales A nabel J uárez J aime M illán V ladimir M atović O ctober 2010 Business Models: Themes and Issues

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

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

4. Company Overview

5. Strategy Source: www.amazon.com

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

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

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

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

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

11. Products & Services Content

12. Interactivity & Production Values

13. Personalization Customization Ownership & Belonging Co-Creation & Recognition

14. 2 3 4 Variety 5 Speed & Delivery 1 Easy Navigation

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

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

17. 2007 1995 2001 2000 1999 2002 2010 Auctions & zShops eBooks/Kindle E-commerce Platform/ Web Services Marketplace OnLine Book Retailing Partherships & Logistic Services Business Model Evolution

18. Business Model Canvas 9 building blocks Value Proposition (VP)

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

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

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

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

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

24. Source: www.amazon.com

25. Source: www.meettheboss.com

26. z Worldwide Sales Mix Q1 ’04 – Net Sales $5,710 MM 76% Q4 ’09– Net Sales $24,509 MM 52% 22% 2% 3 % 45% 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 ) Source: www.amazon.com

27. International Sales MM • 2008 International s ales 47% of WW s ales , up from 45% in 2007 • Shipments to over 200 countries Source: www.amazon.com

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

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

30. 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.

31. Conclusion

32. Sky is the limit

33. Thank you!

34. 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