Affiliation

How they do it: Amazon uses the affiliate model to both promote products of 3rd party vendors as well as their own products through paying promoters who advertise their products. Through individually trackable links, Amazon can track every website visitor to its source and hence has transparency how much sales are driven by affiliates.

Cash Machine

How they do it: In the Amazon web store, customers usually pay in the check-out process prior to the products being shipped (payment upon receivement possible for a fee). This gives Amazon an increased liquidity which e.g. enables growth investments.

Customer Loyalty

How they do it: Amazon drives up customer loyalty through their paid premium subscription membership Amazon Prime. This allows members unlimited free shipping (on many items) and access to various other content. By charging a flat annual fee, customer return as their benefits of the membership increase with the amount of purchases on the website.

Digitization

How they do it: Amazon’s first product category was books. The value proposition of having an online book store is the possibility to offer the customer a greater choice than any book store.

E-commerce

How they do it: Amazon’s online store lets customers order all products directly to their home. By eliminating physical stores, Amazon can optimize their supply chain for home shipping and save both expensive retail space as well as in-person sales personnel.

Integrator

How they do it: For products directly sold by Amazon in its online store, Amazon controls the whole value chain starting from the point of finished manufacturing. Own branded items allow the company to determine price and availability in its store and also allow for preferred promotion of own-brand products with a potential higher margin.

Leverage Customer Data

How they do it: Amazon is collecting the individual interests and purchases of its customers to create cross-selling opportunities with individual marketing and targeting (e.g. ”based on your recent search, we want to show you the following products...” or ”customers who bought product x also looked at product y”).

Long Tail

How they do it: Amazon is offering all kinds of niche products on its platform while ensuring that they are competitively priced. Hence it allows them to adress a big audience of potential customers through its wide offering and good prices, rather than few high margin products. Individual margins might be low but the sheer majority of transactions add up to a significant revenue.

Subscription

How they do it: With its subscription service ”Amazon Prime” Amazon offers free and faster shipping for certain products as well as access to exclusive media content offered on its affiliated platforms (such as audio books on Audible.com).

Supermarket

How they do it: Amazon’s online store (and recently also offline stores) offer a complex variety of products including food and non-food products. The wide ranging assortment attracts customers that are looking for all sorts of products and offers Amazon huge potential for cross-selling.

Two-sided Market

How they do it: In the Amazon online store’s ”marketplace” section, retailers independent from Amazon can sell their products to customers.