Amazon: World's Largest E-Commerce Platform & AI Provider - Research Paper

Introduction

Amazon.com Inc. is an American company of technology with its headquarters at Seattle, Washington. It is a multinational company that offers e-commerce, modern technology, and services involving cloud computing. From the company's revenue and market capitalization demonstrated by the company, it is the largest e-commerce platform in the world (Chai, Potdar & Chang, 2007). The company also tops the list of the Artificial intelligence provider. Also going by the statistics, it is the second highest employer in the United States. The company was established in 1994 by Jeff Bezos in Bellevue Washington. It initially started as a digital books selling company, later increasing the range of products and services across its branches worldwide. The company then began dealing with electronics, computer software, furniture food, computer games, and apparel.

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Revenue Model

Amazon's digital stores and online market forms the foundation for smaller emerging businesses that operate entirely different from the online stores. Such companies include Amazon advertising services and the Amazon prime (Chai et al., 2007). The small businesses run on much higher margins compared to the online platforms which run in tight margins. Through the multiple channels of income, the company can make more profits. Through the sale of a wide range of goods and services, Amazon.com is one of the giant revenue earners in the world. The company is mainly based on an online store, a network which is critical for both reaching to a high number of clients as well as selling a wide range of products. Amazon's strategy of obtaining optimal benefits is to include a wide range of products to cover all the needs of its customers (Ivanov, Tsipoulanidis, & Schonberger, 2017).

The Cash machine is a critical element of the Amazon revenue model. It enables the company runs its operations at very tight margins. Amazon collects payments from the clients instantly after the service, but pay the vendors over an extended terms payment. This is how it generates its cash flow to its operations. The company, therefore, has access to short term liquidity, which is critical when it comes to investments (Chai et al., 2007).

Revenue Sources

Amazon's e-commerce sales stopped growing as exponentially as they did a while ago, making the e-commerce giant to start running other income generating channels. E-commerce, which involves selling third-party products through its platform is the company's most popular source of income. Another critical source of revenue is the Amazon Prime (AP). This is a Service subscription which is increasingly sophisticated and involves transactions of more products/services. AP has 95M users in the US. The total population in the US is 325M, so 29% of Americans have hired this service. Amazon advertisements also give the company a significant amount of revenue (Chai et al., 2007). Sellers can compete organically and for payment on this platform. Amazon's revenue values from the publications begin to approach Google and Facebook figures, which are the giant's companies in the advertisements industry. Amazon Ads billed $ 1.7 Billion $ for advertising in 2018 (Chai et al., 2007). The company also earns revenue through its brands. Amazon is betting heavily on its distribution brand in very diverse sectors. Amazon Web Services (AWS) is the other source of income. The Amazon Cloud solution is also a business in itself whose sales figure in 2017 was 17.4 Billion dollars. The company also opened a physical store in 2017, which generated a revenue of over five billion dollars in value (Chai et al., 2007).

Company Growth

On May 15, 1997, an online bookstore with money losses was made open on the Nasdaq in an initial public offering with a value of $ 438 million. After 20 years, the company, now the Amazon.com, has a value worth over $ 460 billion (Chai et al., 2007). The online giant has injected almost all its revenue into substantial new areas of investment, such as Amazon Prime, Amazon Web Services, and, the Alexa voice computing services. Intending to grow its net income generation, the company, through its executive, has engaged in an exercise of absorbing other industries.

In 2002, after spending years selling physical objects only - and until 1998, only books - he decided to continue diversifying and becoming a platform. He launched AWS (Amazon Web Services), a success that has made him a leader in cloud computing with Microsoft with his Azure and is already assuming almost 20,000 million dollars a year in revenue , which also leave a percentage of profits more significant than the that you get with the trade, between 20% and 25% (Chai et al., 2007).

In 2016, the company earned a total of $ 136 billion in net sales, only spending $ 131.8 billion on operational costs. This approach boosted the company's operating income. In the same year, e-commerce revenues increased by 25%, Amazon Web Services revenues increased by 55%, and net revenues soared by over 300% (Ivanov et al., 2017). The growth was witnessed in 2017 and 2018. Subscription to Amazon Prime, which has been including more and more benefits, is estimated to provide Amazon around 7,000 million dollars a year. Another 3,000 million come from agreements and strategies such as the ad network or credit cards branded and promoted by the platform.

One primary metric for technological stockholders in the public market is the growth of revenues. And Amazon.com continues to grow strong. Meanwhile, it has made sure not to let too much money fall into the income statement, as this could lead to losses. This nature of operation helps Amazon to gain a significant share compared to its competitors whose objectives are to increase profits rather than on growth (Ivanov et al., 2017). This strategy makes the company a large firm in the e-commerce industry, as values have indicated over the years. According to Euromonitor, Amazon is the leading internet retailer in the US.

Future Growth Plan

Amazon recently announced that it is accelerating a movement partly defensive towards logistics and an offensive and disruptive one towards the health sector. Amazon has embarked on investing in the pharmaceutical industry, including e-medical care. This plan is a way of creating a foundation in its plan to invest in a significant healthcare platform, which has been in high demand in recent years (Ivanov et al., 2017). The company's latest advances have been joining forces with some medical device distributors. The remarkable company plans to purchase the $1 billion worth PillPack (Davies, 2019). This is an online based pharmacy which delivers prescriptions as ordered by the customers.

Amazon also aims at integrating technology into third-party logistics (3PL) and major transport companies. With the growth in the transportation management systems (TMS), there is a subsequent growth in challenges faced during the shipping of goods from the vendor to the consumer. There is, therefore, the need to improve security on products, which calls for digitalization in the supply chain management. Digitalization process will including incorporating IT in the transport section, which aims at enhancing easy tracking of goods in transit (Davies, 2019). As a result, security-related issues get solved in the delivery of products and services.

References

Chai, K., Potdar, V., & Chang, E. (2007, August). A survey of revenue models for current generation social software's systems. In International Conference on Computational Science and Its Applications (pp. 724-738). Springer, Berlin, Heidelberg.

Ivanov, D., Tsipoulanidis, A., & Schonberger, J. (2017). Global supply chain and operations management. A Decision-Oriented Introduction to the Creation of Value.

Davies, J. (2019). Online commerce company Amazon could be setting its sights on the US pharmacy market. Suicide, 14, 20.