Amazon Business Model

1. Virginia Rosales Anabel Juárez Jaime Millán Vladimir Matović October 2010 Business Models: Themes and Issues

2. - from A to Z Company Overview Mission, Vision & Values Core Value Proposition, Objective & Strategy Three Customer Sets Attention Economy and e-Trust Business Model Amazon.com Business Model Evolution Business Model Canvas – The 9 Building Blocks 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 Founded in 1994 in Seattle, USA 28,300 employees Global leader in e-commerce Wide range of products Worldwide network of fulfilment Mass customisation Customer experience Affiliations Stickiness

5. • ‘To leverage technology and the expertise of our invaluable employees to provide our customers with the best shopping experience on the Internet.’ Mission • ‘To be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.’ Vision • Customer Obsession • Innovation • Bias for Action • Ownership • High Hiring Bar • Frugality Values

6. • ‘Not to discount a small number of products for a limited period of time, but to offer low prices everyday and apply them broadly across our entire product range.’ Objective • Price • Convenience • Selection Core Value Proposition • ‘To ‘Get Big Fast’ by investing aggressively in new product categories and new businesses, by spending money on brand awareness and getting new customers.’ Strategy

7. Strategy Source: www.amazon.com

8. 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 DevelopersSellers

11. 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

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

13. Products & Services Content

14. Interactivity & Production Values

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

16. 2 3 4 Variety 5 Speed & Delivery 1 Easy Navigation

19. Auctions & zShops eBooks/Kindle E-commerce Platform/ Web Services Marketplace OnLine Book Retailing Partherships & Logistic Services Business Model Evolution

20. Business Model Canvas 9 building blocks Customer Segment (CS) Cost Structure(C$) Customer Relationship (CR) Channels (CH) Revenue Streams (R$) Key Resources (KR) Key Partnerships (KP) Key Activities (KA) Value Proposition (VP)

21. 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 RetailingAuctions & zShopsMarketplacesPartnerships and Logistic Service ProviderE-commerce Platform/Web ServiceseBooks/Kindle COMPANIES (ONLINE & TRADITIONAL RETAILERS)

22. 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

23. Capture Value: transforming earnings into profits Capital efficiency Inventory turnover Cash generative cycle Maximize Profit Dollars, Not Margins

26. Source: www.amazon.com

27. Source: www.meettheboss.com

28. 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

29. International Sales $3,074 $6,740 $8,938 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 2004 2005 2006 2007 2008 MM • 2008 International sales 47% of WW sales, up from 45% in 2007 • Shipments to over 200 countries Source: www.amazon.com

32. Conclusion Evolution • Logical path • Resources & Channels • B2C, B2B Expansion • New markets • Strength of Brand • “Earth’s biggest selection” Attention Economy • Community & Stickiness • Trust • Customer Experience

33. Sky is the limit

34. Thank you!

35. 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

Amazon Business Model

Vladimir Matovic

Amazon Business Model