How Does Amazon Make Money? [INFOGRAPHIC]

Amazon makes a lot of money. But how? Do they make their money on books, or on merchant sales, or on TV shows? Where does the money come from, and what does the breakdown look like? We dig into Amazon and answer all of these questions for you.

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Amazon’s Worth
  • Amazon Market Value
    • $427 billion
  • Traditional Retailer Market Values
    • Sears: $1.2 billion
    • JC Penney: $1.8 billion
    • Kohl’s: $6.8 billion
    • Nordstrom: $7.4 billion
    • Macy’s: $8.9 billion
    • Best Buy: $14.9 billion
    • Target: $29.4 billion
    • Wal-Mart: $221.1 billion
      • Combined: $291.5 billion
  • In 2016, Amazon accounted for 43% of all online retail sales in the U.S.
Rapid Growth
  • Amazon accounts for 34% of U.S. e-commerce
  • E-commerce domination will grow
    • 2016: 34%
    • 2017: 37%
    • 2018: 41%
    • 2019: 45%
    • 2020: 47%
    • 2021: 50%
Why is Amazon so successful?
  • Constantly innovating and adapting
    • Started in 1994 as an online bookseller
    • Since expanded to become cloud computing giant, tablet and smart home device manufacturer, ebook publisher, movie studio, and more
Amazon’s 2017 video production budget is $4.5 billion―that’s over 2X HBO’s budget
  • Focused on customers
    • Ranked #1 on 2017 American Customer Satisfaction Index
    • Ranked #1 on 2017 Corporate Reputation Harris Poll
Amazon knows its customers: about 35% of Amazon’s revenue comes from ““Frequently Bought Together” and “Customers Who Bought This Item Also Bought” features
  • Focused on growth instead of profits
    • CEO Jeff Bezos looks to the future, not the present
    • Operating income 2016: $4.2 billion
      • That’s only 4% of total sales!
Failure is an option: Amazon Fire Phone fizzled out in 2014―instead of giving up, Amazon has since launched Amazon Echo and other successful tech
  • Follow the Money
    • Sales
      • 2016: $136 billion
      • 2015: $107 billion
      • 2014: $89 billion
    • Operating Expenses
      • 2016: $131.8 billion
      • 2015: $104.8 billion
      • 2014: $88.8 billion
    • Operating income
      • 2016: $4.2 billion
      • 2015: $2.2 billion
      • 2014: $178 million
  • Net Sales by Revenue Stream
    • Retail products (67%)
      • 2016: $91.4 billion
      • 2015: $76.9 billion
    • Retail third-party sellers (17%)
      • 2016: $23 billion
      • 2015: $16.1 billion
    • Amazon Web Services (AWS) (9%)
      • 2016: $12.2 billion
      • 2015: $7.9 billion
    • Amazon Prime and other retail subscriptions (5%)
      • 2016: $6.4 billion
      • 2015: $4.5 billion
    • Other (includes ad services and co-branded credit card agreements) (2%)
      • 2016: $3 billion
      • 2015: $1.7 billion
    • In 2016, unredeemed Amazon gift cards alone made $2.4 billion.
Amazon employees are pushed to their limits for the company’s success: “You can work long, hard, or smart, but at Amazon.com you can’t choose two out of three” – Jeff Bezos
  • How Can You Get a Cut?
    • 40% of product sales on Amazon Marketplace come from third-party sellers
      • In 2016, Amazon made $23 billion in sales from third-party sellers
    • How much do sellers make?
      • Annual sales
        • 49%: Less than $100,000
        • 36%: $100,000-$1 million
        • 13%: $1 million-$10 million
        • 2%: More than $10 million
          • Of that, less than 0.6% sell more than $50 million
      • Primary products sold by third-party sellers
        • 18% Home and Kitchen
        • 11% Toys and Games
        • 9% Books
        • 8% Health
        • 8% Beauty
        • 7% Electronics
        • 7% Clothing
        • 6% Sports and Outdoors
  • Amazon revered and feared
    • Sellers concerned about punishment/competition from Amazon
      • Top concerns
        • 61% Amazon taking away my seller privileges
        • 44% Amazon selling my items
        • 43% Negative customer feedback
      • What do sellers owe Amazon?
        • Professional sellers (sell more than 40 items per month): $39.99/month + 10-15% of transaction
        • Individual sellers (sell fewer than 40 items per month): $0.99/sale
      • 79% of sellers use Fulfillment by Amazon (FBA) services
        • Amazon stores, packages, and ships your products for you

Sources:
Michael Ugino Michael Ugino is the co-founder & CMO of Sellbrite. A former IR 300 merchant, Michael hails from South Carolina but now lives in California. He'd be delighted for you to connect with him on LinkedIn.