Season 4, Episode 8: The Amazon Business Model (and the Strategy You Can Learn From It)
Play • 21 min

In EPISODE 8, we take a deep dive into Amazon’s business model. The company started out selling books. But that was a beta test for everything else it could sell online.

We look at the company's strategy to sell everything else and how it keeps customers in its ecosystem.

We leave you with questions you can ask yourself about your business. What can you do to become indispensable?

WHERE AMAZON STARTED

  • Jeff Bezos started Amazon with $245,000 from his parents, in his garage. 
  • It launched in 1995 as the world's largest bookstore. But books were simply a beta test for Amazon's sales infrastructure and business model. After conquering the book business, Amazon realized it could feed more than paperbacks into its incredibly efficient sales network. Bezos believed in always be evolving.

1. Figure out what your customers crave.

Amazon's initial work with book sales helped it recognize that people cared quite a bit about getting goods as quickly as possible. This realization helped Amazon as it began to offer different products. It recognized that the delivery logistics involved were just as important as the quality of the goods it offered. 

Figure out what truly matters to your customer base, and adjust your business model to address those needs.

2. Create Unexpected Value

Delight your own customer base by solving problems they never knew existed. Pinpoint a shortcoming that people generally accept as a cost of doing business -- slow delivery, a lack of options or a lackluster review system -- and explore potential ways to eliminate those stumbling blocks. Once Amazon solidified its logistics based on one product category, it began to implement its model to other verticals.

3. Satisfy every customer.

 Lesson here is that if your company can meet a basic human need (and do it better than anyone else), you're in solid shape to carve out a substantial customer base.

4. Pivot into things you make

Until the Kindle was introduced in November 2007, Amazon sold stuff. It didn’t make anything. But Bezos knew that ebooks wouldn’t take off without a sweet device on which to read them and an online store to make purchasing them easy. First-mover status does not necessarily guarantee that a company will lock up an entire category, but it worked for Steve Jobs, and Bezos was confident it would work for Amazon.  Today, Amazon maintains an estimated 60% of ebook sales 

This pivot into hardware, while surprising at the time, also helped usher in Amazon’s whole cloud computing initiative, because like Apple, Bezos wants to lock in customers into his ecosystem. Purchase ebooks, music and now movies from Amazon, store them in Amazon’s cloud, play them on Amazon’s device and, with a nod to Microsoft’s Windows strategy, if you don’t want to buy a Kindle you can use Amazon’s Kindle app on your iPad.


More than merely wanting to sell as much stuff as they can to the most people, Amazon strives to become so ingrained in people’s lives that they can’t imagine living without it.


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