Amazon Business Model

1. Virginia Rosales Anabel Juárez Jaime Millán Vladimir Matovid 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 28,300 Global leader in in Seattle, USA employees e-commerce Worldwide Wide range of Mass network of products customisation fulfilment Customer Affiliations Stickiness experience

5. Mission • ‘To leverage technology and the expertise of our invaluable employees to provide our customers with the best shopping experience on the Internet.’ Vision • ‘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.’ Values • Customer Obsession • Innovation • Bias for Action • Ownership • High Hiring Bar • Frugality

6. Objective • ‘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.’ Core Value Proposition • Price • Convenience • Selection Strategy • ‘To ‘Get Big Fast’ by investing aggressively in new product categories and new businesses, by spending money on brand awareness and getting new customers.’

7. Strategy Source: www.amazon.com

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

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

14. Interactivity & Production Values

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

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

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

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

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

22. eBooks/Kindle Amazon reported 80% of >450 000 books eBook market available for download Kindle eBooks add 35% Newspapers, to a physical book’s magazines and blogs sale on Amazon subscription eBooks downloaded Amazon keeps 65% of from Amazon not the revenue from all exclusive to Kindle eBook sales for Kindle "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 Cash generative Inventory cycle turnover Capital efficiency Maximize Profit Dollars, Not Margins

26. Source: www.amazon.com

27. Source: www.meettheboss.com

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

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

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

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