There is a stark difference in the e-commerce industry before and after the rise of Amazon. The international e-commerce behemoth has redefined standards of online retail and shopping services, making the most out of the marketplace business model.
The steadily increasing sales figures speak for themselves — Amazon hit nearly 575 billion U.S. dollars in net sales revenue worldwide in 2023. Due to its global scope and reach, Amazon is considered one of the most valuable brands worldwide.
Selling strategies and operations
Most of Amazon's revenue is generated through e-retail sales of different categories of products, followed by third-party seller revenues, retail and media subscriptions, and AWS cloud services. Amazon serves as a global platform for third-party sellers (3P), which are independent sellers using Amazon as an e-commerce site to offer their products. 3P sales account for roughly 60 percent of total paid units on Amazon’s marketplace. Amazon also provides sellers with end-to-end logistics services. The fulfilled-by-Amazon (FBA) option includes order picking, packing, shipping, and handling and it is now used to distribute about half of the units sold in most Amazon’s markets. To be even more competitive, FBA services implemented a network of efficient but more expensive micro fulfillment centers, with the result that sellers with large inventories will pay higher fees starting from February 2024.
Milestones for an Amazon’s business empire
About 100 mergers and acquisitions have paved the way for Amazon’s commerce empire. Since the enormous take-over of grocer Whole Foods worth 13.7 billion U.S. dollars in 2017, Amazon has invested in several industries, from entertainment to tech, from logistics to healthcare. However, the last operation involving vacuum cleaner manufacturer iRobot did not have a happy ending. The deal came under the scrutiny of European authorities, who warned that the acquisition further strengthened Amazon’s position in the e-commerce market. Due to the investigation, Amazon terminated the operation in January 2024.
Amazon’s patent filing activity is intense and signals that the company will stay at the forefront of technology innovations. Drone delivery services – branded with ‘Prime air’ - are being tested in the United States, Italy, and the UK. In addition to that, Generative AI is already being used for personalization and content management purposes. In 2024, Amazon launched the LLM-model-based Fit Insight Tool, which assists brands in identifying reasons for product returns by analyzing customer feedback.
Retail giant in times of recession
Like other e-commerce players, Amazon has been affected by the economic recession and general downturn of online consumer demand in 2022. That year was marked by a workforce reduction and lower profitability, as the negative net income showed. Both indicators seem to have stabilized in 2023, opening more optimistic prospects for Amazon in 2024.
