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Central to any understanding of the multifaceted nature of Amazon’s business today is the concept of the “flywheel” at the heart of the company. Put simply, it’s an idea that refers to a self-reinforcing cycle that drives the continuous growth of Amazon’s various businesses, including its retail arm, its Prime subscription service, and more.
Also known as AWS, Amazon Web Services is a suite of IT resources such as storage, databases, and more. While Amazon owns AWS, lots of other tech companies—including Slack and Pinterest—use it to help run their IT operations. In 2023, AWS brought in $25B in profit—outpacing Amazon's entire North American retail division.
Books were just the start, as founder Jeff Bezos' ultimate goal was to create an "everything store," using the internet to transcend the physical limitations of brick-and-mortar retail. The Seattle-based Amazon gradually added CDs and consumer electronics, becoming a dominant e-commerce player in the late 1990s, and one of the few dot-com companies to make it through the bust.
Bezos parlayed a career on Wall Street into founding an online bookstore that would evolve into the largest online retailer in the world. Bezos’ story is characterized by his relentless focus on innovation and on the customer experience at Amazon.
Although Walmart is roughly 30 years older than Amazon, the e-commerce giant has a significant lead in online US retail sales: Walmart's share is roughly 7%. Season 33 of the podcast "Business Wars," hosted by David Brown, is all about one of the most intense rivalries in all of retail.
Jeff Bezos, however, took pride in Amazon's early unprofitability, reinvesting the money Amazon made back into its business, prioritizing investment into long-term growth and customer acquisition over short-term gains.
Central to any understanding of the multifaceted nature of Amazon’s business today is the concept of the “flywheel” at the heart of the company. Put simply, it’s an idea that refers to a self-reinforcing cycle that drives the continuous growth of Amazon’s various businesses, including its retail arm, its Prime subscription service, and more.
The first letter to Amazon’s shareholders, written by founder and then-CEO Jeff Bezos in 1997, is a key part of the Amazon story—laying out the company’s long-term approach to the business and several of its core operating values. Bezos emphasizes, for example, Amazon’s plan to start with a bookstore but to evolve into a much larger ecosystem.
Over the years, Amazon founder Jeff Bezos often recalls how wrong the predictions in the 1999 Barron’s cover story were. Among other things, that article declared Amazon’s entire business model to be unsustainable and destined to fail, noting its lack of profit and dependence on a massive amount of capital to fund its growth.
Amazon fulfillment centers are the large warehouses where products that customers have ordered are stored, packed, and shipped. In order to efficiently manage inventory and process millions of orders each day, the centers rely heavily on advanced technology and robotics.
Prime drives customer loyalty and boosts Amazon’s revenue through its monthly and yearly fees. The key components included with a Prime subscription include free two-day shipping on eligible items, as well as access to services like Amazon Music and Prime Video.
The United States is home to more than 33 million businesses, the vast majority of which are small businesses, with millions being created (and others closing shop) every year. These businesses often rely on loans, provide the goods and services that keep the economy flowing, and sometimes even grow large enough to enter public markets or provide private investment opportunities. Explore key topics central to business and finance, from the role of the Federal Reserve to how initial public offerings work, how millions of American students finance higher education, and more.