There is a lot more to this industry behemoth than just online retail
Unless you have been living in a cave for the last twenty years, it would be almost impossible not to be aware of the e-commerce giant that is Amazon. However, while most people consider Amazon mostly a web retailer, when you scratch a little below the surface of the firm, it becomes startlingly clear that Amazon’s ambitions lie far beyond just selling online.
From its significant e-commerce operations to its burgeoning subscriptions and storage/network solutions, here is a quick look at the story behind this giant corporation, currently ranked as the biggest internet-based company in the world.
A brief history of Amazon – from bookseller to online titan
The name, Amazon.com was registered in November 1994 and soon after began trading as an internet bookseller. However, while books were a convenient starting point (they are relatively easy to source, package and distribute to purchasers) founder Jeff Bezos had always had ambitions far beyond just book sales. Over the following years, Amazon slowly branched into also selling computer games, music, electronics, games, toys, etc. From the year 2000, the Amazon model was slowly starting to take shape and coming to more closely resemble the store we know today. Over the following years, it would come to expand into almost all areas of retail – everything from clothing to home improvements and electronics.
From retailer to service provider – the march of success through the 2000s
Bezos had always insisted he wanted Amazon to be a bona fide tech company rather than just simply a retailer. As the profits rolled in and the main bookselling arm of the company continued to expand through purchasing potential competitors around the world, Bezos started to branch into other investments. This tactic would come to form the basis of the company as it stands today – a firm almost impossible to define with interests in e-commerce, cloud service provision, software, services, movie production and device manufacturing (among many others).
How Amazon makes money now
However, while the company itself might be quite difficult to sum up in simple terms, its ability to make money is beyond question. In the 27 years under the guidance of Bezos, Amazon stock rose an incredible 225,000% while he has amassed a personal net worth of around $190 billion (he was reported to be the first man worth $200 billion in 2020 by Forbes Magazine). Meanwhile, the Amazon empire now employs more than a million workers and has a current worth of around $430 billion. Here are just a few of the ways Amazon now makes its money.
Online retail: The traditional heart of Amazon still generates significant money for the firm and continues to expand. As more and more of us become more au fait with shopping online, the giant dominates when compared to other online retailers. In 2019, Amazon’s e-commerce arm was valued to be worth around $31 billion – an increase from 2018 of 14% – but still the slowest-growing side of the firm.
Third-party seller services: While sales may be slowing slightly (14% growth in a year is still impressive, considering), Amazon has another trick up its sleeve when it comes to how it generates money – namely its third-party seller services which include sales commissions, order-fulfillment services, shipping, etc. In 2019, this part of the company enjoyed an estimated 23% growth.
Amazon Web Services (AWS): One of the fastest-growing sectors for the company is its Amazon Web Services division which offer cloud hosting solutions. Amazon has an impressive client list including big-name companies like Disney, Adobe, Pinterest and Airbnb. To truly benefit from the advantages offered by AWS, companies employ skilled computer engineers to run their servers – typically educated to AWS sysops certification level. As firms move increasingly to cloud-based models, this side of the company will continue to grow. In 2019, AWS was worth around $8.4 billion – a spectacular 37% rise on the previous year – and the company dominated with an estimated 32% market share, almost double that of its nearest rival, Microsoft.
Subscription Services: Amazon also makes considerable revenue from its own media production divisions – namely, Amazon Prime, Amazon Music and Prime Video. This is another side of the company that is enjoying unprecedented growth – another 37% increase in profits through 2019 compared to 2018, amounting to approximately $4.7 billion.
Physical stores: Amazon is increasingly looking to building a stronger real-world presence rather than existing purely online and its physical stores are starting to appear in larger cities around the world. While this area has proven to be comparatively slow to grow (through 2019, there was no percentage increase), it is still worth $4.3 billion.
The deceptively vague ‘other’ category: Amazon tends to be rather vague when breaking down the ‘other’ category but this division covers everything from its online advertising services to sales of hardware like the Echo and Ring devices. Amazon also owns many other firms including Audible, gaming platform Twitch and countless other companies in e-com, software, services and pharmaceuticals (again, to name just a few).