Business Profile of Amazon Inc

All you need to know about Amazon Inc: In Brief

  • Company Name: Amazon Inc (NASDAQ: AMZN)
  • Headquarters: Seattle, Washington, United States.
  • Founded: 5th July 1994.
  • Founder: Jeffrey P Bezos (Jeff Bezos)
  • CEO: Andrew R Jassy (Andy Jassy)
  • CFO: Brian T Oslavsky
  • AWS CEO: Adam N Selipsky
  • Number of Employees: 1,298,000 (December, 2020)
  • Markets Served: Global
  • Global  Revenues: $386,064 million
  • Net Income: $21,331
  • Market Capitalization: $1.69 Trillion (Jan 3, 2022)
Amazon business profile - products, customers, competitors and financial review.
Amazon Inc is the largest e-commerce and cloud brand in the world.

About Amazon Inc:

Founded by Jeffrey P Bezos (Jeff Bezos), Amazon is the world’s largest e-commerce and cloud technology company.

It has experienced explosive growth over the past several years.

Jeff Bezos founded Amazon in 1994.

The company experienced robust growth in its annual net revenues over 2020 driven by increased consumer spending on online shopping and cloud based services.

Andrew R Jassy (andy Jassy) became the new CEO of Amazon in 2021.

Jassy was previously the CEO of Amazon’s Cloud services (AWS).

Amazon serves the global market and has a worldwide sales and distribution network.

Apart from its digital sales and distribution channels, the company has also extended its network of physical stores to grow its global footprint.

Consumers worldwide can access Amazon through its websites, mobile apps, Alexa, devices, streaming, and by visiting Amazon’s physical stores.

Amazon’s global net revenues in 20020 grew 38% compared to the previous fiscal rising to $386 billion compared to $280.5 billion during the previous year.

Its operating income also grew to $22.9 billion compared to $14.5 billion in the previous year.

AWS revenues (cloud revenues) of the company jumped to $45.4 billion in 2020 compared to $35.03 billion in the previous year.

Global Operations:

Amazon is a global e-commerce and cloud services company that sells its products and services to customers globally through digital and physical channels.

It has its headquarters located at Seattle, Washington, United States. 

The company has divided its global operations into three main segments that include two geographical segments and the cloud business of the company.

Amazon’s President and CEO is Andy Jassy.

Its global consumer segment is headed by David H Clark and Adam N Selipsky heads Amazon’s cloud business.

The two geographical segments of the company are North America and International.

The single largest geographical market of the company is the United States, followed by Germany, United Kingdom and Japan.

The United States alone accounted for more than 68% of the company’s net revenues in the year 2020.

Amazon warehouses are called fulfillment centers.

The company has more than 185 active fulfillment centers worldwide with more than 110 in the US alone.

According to a 2020 report, California had the highest number of fulfillment centers (21) including open and planned fulfillment centers.

Products and services offered:

Amazon offers a wide range of products and services.

Its core business is e-commerce and cloud computing.

The company also sells a nice range of Alexa enabled devices and other Amazon made products.

Amazon has classified its products and services into five primary categories based on net sales.

These categories include Online stores, physical stores, third party seller services, and subscription services.

Rest all are classified as others.

The company sells its products to customers worldwide through online stores and physical stores. 

The focus is on price, large selection of products and customer convenience.

It enables sellers from across the world to sell their products through Amazon’s online and physical stores.

Amazon generally receives fixed fees, a percentage of sales, per unit activity fees, or a combination of two or more of these from the sellers.

The sellers in return are able to sell their products through Amazon’s online and physical stores and fulfill orders through Amazon’s sales and fulfillment network.

Amazon also serves developers and enterprises through AWS.

AWS offers a  broad set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services.

The leading categories of services offered by AWS include the following:

  • Analytics
  • Application Integration
  • AR & VR
  • AWS Cost Management
  • Blockchain Business Applications
  • Compute 
  • Containers
  • Customer Enablement
  • Database 
  • Developer tools
  • End user computing
  • Front end web & mobile
  • Game Development
  • Machine Learning
  • Internet of Things
  • Management & Governance
  • Media Services
  • Migration & Transfer
  • Networking & content delivery
  • Quantum technologies
  • Robotics
  • Satellite
  • Security, identity & compliance
  • Storage

The company also manufactures and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, and other devices.

Amazon Prime is a membership program that includes unlimited free shipping on over 100 million items, access to unlimited streaming of tens of thousands of movies and TV episodes, including Amazon Original content, and other benefits.

Amazon serves independent authors through Kindle Publishing, where the authors and publishers can choose a royalty program.

They can make their books available to a global audience through the Kindle Publishing store.

It also offers programs through which authors, musicians, filmmakers, skill and app developers, and others can publish and sell their content online.

Amazon Target Customers and Competition

Amazon is the world’s largest e-commerce and cloud services company that serves a large customer base globally.

The company has continued to expand its global reach through both online and physical channels.

It serves several customer segments with diverse needs and preferences.

Its focus is on quality, pricing and customer convenience.

Amazon operates in a highly competitive market and industry environment.

Apart from growing price competition between various ecommerce and cloud services providers, there is competition for attracting customers and for advertising dollars.

With fast paced technological advancement, the industry has undergone a significant transformation within very few years.

Amazon is known as the biggest R&D spender in the world and the entire industry.

In 2020, the company spent $42.7 billion on research and development compared to $35.9 billion in 2019.

The main reasons behind its heavy R&D expenditure include growing its competitive edge, boosting business performance, improving customer experience and maintaining its market leadership amidst a hyper competitive business environment.

The primary customer segments Amazon serves through its e-commerce and cloud platforms include individual consumers from around the world, developers, content creators, enterprises of various sizes, and sellers.

Amazon also provides advertising services to sellers, vendors, publishers, authors and others through various advertising programs including sponsored ads, display, and video ads.

Its customer segments also include public sector customers, healthcare providers, and customers in the education and nonprofits sectors.

Amazon’s strength lies in providing quality products and highly innovative technological services at competitive prices and with extra customer convenience. 

All these factors have helped the company become the consumers’ favorite e-commerce and cloud services platform in the world.

Its customer base has continued to expand at an impressive rate as the penetration of internet technology globally has continued to rise.

While the company faces intense competition from a large number of small and big players in the technology and some other sectors, very few players pose a challenge to its clout and market position.

The company also sells its cloud computing services to leading technology brands like Netflix.

It offers its ecommerce platform to sellers from across the world who can sell their products to customers across the globe.

Sellers and developers, apart from individual consumers, a large segment of which mainly includes the millennials and Gen Z, are among Amazon’s leading target customer segments.

Amazon and third party sellers sell hundreds of millions of products through its global ecommerce platform.

Public sector enterprises are also a leading segment of consumers of Amazon’s cloud services.

According to Amazon, there are more than 7,500 public sector institutions that utilize AWS services.

In the US, a large number of government agencies use AWS to solve a large number of technological challenges.

AWS enables them to balance cost advantage with agility, privacy, compliance and reliability.

Amazon is operating in an intensely competitive industry environment where it faces severe competition from diverse sources.

According to its 2020 Annual report, Amazon’s current and potential competitors include:

(1) physical, e-commerce, and omnichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products we offer and sell to consumers and businesses;

(2) publishers, producers, and distributors of physical, digital, and interactive media of all types and all distribution channels;

(3) web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers;

(4) companies providing e-commerce services, including website development and hosting, omnichannel sales, inventory and supply chain management, advertising, fulfillment, customer service, and payment processing;
(5) companies providing fulfillment and logistics services for themselves or for third parties, whether online or offline;

(6) companies providing information technology services or products, including on-premises or cloud-based infrastructure and other services;

(7) companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices;

(8) companies selling grocery products online and in physical stores; and

(9) companies providing advertising services in digital and other formats.

Amazon’s competitors include several international and local businesses.

Its rivals are several leading global brands that are among the mightiest in the tech industry.

Apple’s Siri enabled products compete with its Alexa enabled products.

Google and Microsoft are among its leading rivals in the cloud industry.

The other rivals in the online streaming sector include Netflix, Disney HotStar, Apple Tv+, YouTube, Hulu and others.

In the ecommerce sector, Alibaba, Ebay, Flipkart, Walmart, Costco, Target and several more retail brands that have strengthened their digital presence over the past few years are among the competitors of Amazon.

Amazon’s competitive strength has continued to improve as the company invests a huge sum in research and development each year.

Its R&D expenses have grown each year at an impressive rate.

Amazon also continues to improve its competitive edge in the ecommerce and online streaming sectors apart from the cloud sector, by improving its range of products and services.

It has improved the range of movies and shows included in Prime video subscriptions through partnerships with leading international and local entertainment brands.

Amazon’s Financial Performance in 2020: A Brief Review

Amazon has experienced unprecedented growth in net sales and operating income in 2020, driven mainly by the increased demand for online s hopping and cloud computing services during the pandemic.

While the pandemic drove online shopping demand higher, it also drove the need for digital services higher.

A large number of businesses were forced to close their physical operations and divert resources towards digital channels.

As a result, the demand for cloud computing services among business enterprises of all sizes grew as their technology needs did, which primarily benefited the leading cloud services providers like Amazon, Google, and Microsoft.

Amazon experienced 38% growth in its net sales compared to the previous year.

The company has divided its business operations into three main segments, and all the three segments experienced significant growth during the year.

Where Amazon’s North America operations experienced a 38% increase in net sales, its International operations experienced an increase of 40% in net sales.

AWS sales also grew by 30% in 2020 compared to the previous year.

The table below shoes the net sales of the company from each operating segment in 2020 and 2019 as well as the percentage change.

Operating Segment/Net sales in millions20202019% change
North America$236,282$170,77338%
International$104,412$74,72340%
AWS$45,370$35,02630%
Total$386,064$280,52238%
Amazon Net sales in 2019 and 2020.

The following table shows Amazon’s net sales from each operating segment over the last five years.

YearNorth AmericaInternationalAWS
2020$236,282$104,412$45,370
2019$170,773 $74,723$35,026 
2018$141,366$65,866$25,655
2017$1,06,110 $54,297 $17,459 
2016$79,785 $43,983 $12,219 

In 2020, Amazon also experienced solid growth in its net income compared to the previous year.

Its net income grew by more than 80% compared to the previous year.

Amazon’s net income for 2020 grew to $21.3 billion in 2020 compared to $11.6 billion in 2019.

Its total assets grew to $321.2 billion in 2020 compared to $225.25 billion in 2019.

In 2020, the profitability of the platform grew to several reasons.

On the one hand, while the increased product and services demand caused by the pandemic drove net sales and revenues higher, on the other the increased focus on pricing and innovation attracted customers to the platform in larger numbers.

Instead of gross margin or gross profits, the company uses operating income as a measure of profitability.

Its net operating income in 2020 remained $22.9 billion in 2020 compared to $14.5 billion in 2019.

Amazon generated positive operating income from its international operations in 2020 compared to an operating loss in the previous year.

Its net operating income from international operations in 2020 remained $717 million compared to a net operating loss of $1,693 million in 2019.