How Jeff Bezos made Amazon a $1.6 Trillion company?
Jeff Bezos quits his bank job in 1994. He quits his job as a banker to start his own business. At this time the wicker of internet was increasing rapidly. That’s when Jeff came up with the idea of doing something internet related. It was at this point that he came up with the idea of setting up an online store to sell books.
What do you think the name of this store will be? The store was named Cadabra by Jeff Bezos. But then he realized that the name was not right. So they were registered in many domain names. Such as awake.com, browse.com, bookmall.com, relentless.com And last named Amazon.
How was Amazon named?
The Amazon is the largest rainforest in the world. And the Amazon River is also the most notable river in the world. So the company that Jeff Bezos will create will be the largest bookstore company in the world. The idea led to the naming of Amazon. Nowadays, Amazon is the largest company to buy anything other than just a big bookstore.
There is also an Amazon Prime video. The largest OTT platform. And Today, Amazon Alexa, Amazon Kindle, Amazon Driveway, Amazon Music, Amazon Adable, Amazon Pay, Amazon Fresh has also started delivering rations. At one point, Amazon even launched its own smartphone. But the idea was a flop. But nowadays Mazon has become a very big company. Amazon is the largest company in the world spread across different sectors.
What is business model of Amazon?
The idea of Amazon was very simple in the beginning. But it was a unique idea at the time. Then there was the idea of creating an online bookstore. At that time people had to cross book stores to buy books. So in the beginning Amazon’s website was just a bookstore website. The idea behind buying a book online was that the customer could see a lot of books in one place.
At that time people had a special need for this idea. Amazon has been a successful company since its beginning. Amazon launched its website on the 1995. By the end of the year 1996, Amazon had 1,80,000 customers. By 1997, Amazon’s revenue had reached $149 million. It was then that Jeff thought of making Amazon a public company. By 1998, Amazon’s revenue had reached $600 million.
There are two main reasons behind the success of Amazon
- Amazon was offering its customers a great deal
- Flywheel effect.
What is Flywheel effect?
The flywheel is a rotating wheel. If one rotates from one place it will rotate more. At the time, Amazon’s business model was like a flywheel. Amazon was selling books at a cheaper price. So he had millions of books on his website. So the customers were happy and so other sellers started coming to Amazon to sell their books. So the customer started getting more options to buy books. As Amazon’s profits soared, Amazon continued to improve its website.
Amazon a $1.6 Trillion company?
In the 1998, Bezos came up with the idea of selling computer games and music through this business model, in addition to books on Amazon. Since then, computer games and music have also started selling on Amazon. The Amazon company grew over time.
A new functionality was added by Amazon that had a Buy Now With 1-Click Button. You could buy the same with one click of this button. Bezos patented this technology. Items can be easily purchased with this button. You have to save your personal information to use this button. Amazon continued to track this information. What items are purchased with this button? The customer was also shown other items in his Suggestion. For all these reasons, Amazon’s sales began to grow.
Many other companies have tried to copy this idea. But this technology was patented by Amazon so no other company could use this technology. Then in 2012 this patent expired, So now any company can use this technology.
Basic skills are required first in any field. So you can come up with ideas for starting your own business. Like Jeff Bezos already had a knowledge of computer science. He was working in an investment bank so he knew that he needed internet. If you want to succeed in any field, you need to have basic knowledge.
The Amazon Marketplace was launched in year 2000. Anything could then be sold on Amazon. With the advent of the Amazon, the development of the Amazon began so fast that there was a shortage of data storage. Jeff then decided to develop his own data storage facility. And was created AWS(Amazon Web Service). There was not much competition on this technology. So this business was very successful for Amazon.
40% of profits come from AWS. Top companies in the world are using Amazon’s web service. The Kindle was launched by Amazon in 2007. Which was a type of book reader. Where customers can also read books digitally. For Jeff, this Device was 0% profitable Device. Kindle is the world’s number one e-book reader today.
In 2014, Amazon launched its own smartphone. But in this technology he was late. Because the first iPhone was launched in 2007. That’s why Amazon Fire phone was a phone Failer.
Competition of Amazon and Flipkart
After that, Flipkart was launched in the Indian market in 2007. At that time, Amazon was not in the Indian market. During this time Flipkart got time to develop itself in India. Then in 2013 Amazon was launched in India. This is a duopoly of both the companies. Both of these companies have about 30% Share. Flipkart has 3 times more customers than amazon.in. Flipkart’s revenue is also higher than that of amazon.in. The big reason behind this is that Amazon is spending a lot of money in India, So that Amazon can increase its market share. But all in all, Amazon’s growth has been higher worldwide.
Amazon’s quarterly revenue is more than $100 billion. This was greatly exacerbated during the Corona epidemic. People were turning to online shopping because of Lockdown. This made Amazon more profitable, and Jeff Bezos became the world’s richest man.
Business model of Amazon
- 1P Model
- 3P Model
The 1P model does not get much profit. Amazon comes with a more profitable 3P model. In the 15 model, Amazon has to store its own items. While in the 35 model, the items are sold by the direct seller and the customer. Amazon doesn’t have to store anything. Only through website can people buy and sell their items. Amazon’s biggest profit comes from AWS. Because in this business Amazon is 50% profit margin.
Which is constantly increasing over time. For all these reasons, Amazon has become a $1.6 trillion company today.