3. Analysis :
Known best as the largest internet retailer in the world, Amazon.com is not a simple case study in
terms of business model analysis. Even if we begin by looking at it's consumer retail business, it
quickly becomes clear that the company is anything but a traditional retailer. While Amazon does
sell products at a standard mark-up, it has also pioneered alternate retail strategies by acting as the
gateway for other retailers and a very robust marketplace for used goods. But retail is only part of
the picture when it comes to Amazon.com.
3.1 . Lines of Business
The company itself defines its lines of business in terms of product sales, service sales, AWS,
fulfillment, publishing, digital content subscriptions, advertising, and co-branded credit cards. For
our purposes, I'll define Amazon's lines of businesses as :
a)Online Retail : The online retail line of business includes those products sold by
Amazon as a traditional retailer, most commonly as a low-cost retailer. Amazon claims
to have "Earth's Biggest Selection" of products available through its family of websites,
sold at the lowest cost at a small profit. The company started as an online book seller,
rapidly expanding into music and movies, and ultimately into electronics and household
goods. But Amazon doesn't stock everything that is sold through its website. Another
part of its retail strategy is to serve as the channel for other retailers to sell their products
and taking a cut of every purchase. Amazon maintains its status as a destination website,
but does not have to maintain inventory on slower-selling products. This strategy has
made Amazon a leading long-tail retailer, expanding its available selection without a
corresponding increase in overhead costs. Extending this long tail retail model further,
Amazon introduced the sale of used products through its seller marketplace. Originally
developed to compete with eBay, the seller marketplace provides another retail revenue
stream for the company without the need to stock products in its warehouses.
Advertising and shipping are handled exclusively by sellers, with Amazon taking a cut
of every sale simply for providing the channel.
b)Internet Services : Amazon's Internet services cannot easily be discussed as a
standalone line of business because it is deeply intertwined with both its retail business
and the Kindle ecosystem. From the consumer perspective, Amazon has begun to
provide services like Amazon Prime, which provides free two-day shipping on retail
purchases, on-demand video streaming, and free access to the Kindle library, all for an
annual fee. Amazon Prime overlays the subscription and all you can eat business models
with the retail model to provide additional customer value. Unknown to most Amazon
customers, however, are the other Internet services provided by Amazon, referred to as
AWS (Amazon Web Services). Originally developed as a side business, Amazon decided
to lease out its own server space to other companies and individuals. While not a core
part of the company's strategy, Amazon found itself managing a large number of servers
and Internet services, and it was a fairly small effort to manage those services for others.
c)Kindle Ecosystem : Amazon has expanded its business into manufacturing and
distributing the family of Kindle tablets. Originally designed as an electronic book
reader (supplementing its online book seller business), the Kindle has become a fully
functional tablet and media device. With the Kindle, Amazon serves as both
manufacturer and traditional retailer (and also wholesaler by selling the device through
other retailers).
While the company does not admit as much, it is assumed that the Kindle devices are
sold at a loss, which would more correctly put this line of business into the razors &
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