Amazon Digital Ecosystem Strategy, Explained

Within its businesses, Amazon singles out online and physical stores, third-party seller services, Amazon Web Services, and subscriptions. Let’s take a closer look at each category and see how they coexist and support each other in Amazon’s ecosystem.

With time, Amazon launched new platforms for different varieties of goods and services. Now, it runs marketplaces of business bulk shopping, pre-used goods and devices, handmade produce, apps, and home service contractors.

It also acquires third-party businesses, expanding into new product categories and geographical areas. In 2017, it made a decisive stride into the Middle Eastern market by acquiring Souq.com, the largest e-commerce platform in the Arab world.

Together with e-commerce, it develops offline locations, a strategy which helps keep afloat during fluctuating times. During the pandemic, the Amazon Marketplace experienced its highest sales rates, making over $222 billion in net revenue. Now, in 2023, the company expects the opposite trend to take over and is getting ready to go big on physical stores.

For marketplace sellers, it takes care of delivery, offers logistics, analytics, marketing, and advertising tools. Amazon also runs programs that help creators sell their content on Twitch and in the Kindle Store. In both cases, it takes a fixed fee per sold unit and benefits from the increased online sales.

Providing third-party seller services works as a standalone business. In 2022, such services earned the company $117 billion, becoming the second most-profitable source of income for Amazon.

Amazon invests in artificial intelligence and robotics to cut its costs and improve internal operations. It uses its own AI-powered recommendation engine to study users’ preferences and personalize their experience on amazon.com, and creates software and machinery to optimize the workflow in its fulfillment centers. For example, using Amazon Robotics systems in its warehouses.

It also develops consumer electronics and technology to pair with it. Its most popular digital solution is the voice assistant Amazon Alexa, which powers Amazon Echo devices and works as another customer touchpoint.

Its most popular offering, Amazon Prime, helps the company engage more users and works as the ultimate client touchpoint. It introduces users to several Amazon ecosystem services at once: Amazon Music, Prime Video, Reading, Gaming, and Photos, as well as bonuses like faster deliveries and exclusive deals on the Amazon Marketplace.

By offering multiple services and benefits in one package, it hooks customers on its digital ecosystem and takes over almost all aspects of their online experience. In 2021, Amazon Prime had over 172 million users in the U.S. and over 200 million users worldwide.

Amazon Prime Video is another customer touchpoint that drives users to the ecosystem. In 2022, it featured the first season of The Lord of the Rings: The Rings of Power, that reached over 100 million viewers and resulted in new Prime sign-ups.

Prime Video hosts popular movies and TV shows from other providers and offers content by Amazon Studios, its own private-label production company. To expand its movie library and compete with other streaming services, Amazon bought Metro-Goldwyn-Mayer, the legendary studio behind the Rocky and James Bond franchises. Now, its content will be available on Prime Video, attracting more viewers to the streaming platform and, eventually, to the whole ecosystem.