How Amazon Works – How Do They Make Money?

How Amazon Works – How Do They Make Money?

Amazon started from very humble beginnings and when they first came onto the scene they sold books only online. This business model represented somewhat of a challenge and for the first couple of years that Amazon was around they actually lost money. While Amazon still sells books, and lots of them, they now sell really anything under the sun and the days of losing money are over as Amazon now makes money hand over fist.

Amazon has various ways for people interesting in buying something to look up what they are after and many times you can obtain an item on Amazon that is new or get the same item used and save a little bit of money for yourself. The items that are for sale are provided by both big business and small home based entrepreneurs as well. Anybody can open up an Amazon account and sell products of their choosing with relative ease.

Similar to eBay, a seller on Amazon will create listings of the items that they have for sale and those items will then go live on the Amazon website. The items will stay up for as long as it takes for the items to sell, or until the seller decided that they want to manually delete the items for sale. Once an item sells and has been paid for the seller will ship the item to the buyer and the transaction is complete.

Amazon makes it money by taking a small percentage of the sale price of each item that is sold through its website, sort of like a commission. This is also similar to the eBay business model except that eBay charges an ‘insertion fee’ ever time an item is listed where as Amazon does not. So you only have to pay on Amazon when something sells.

It may not seem like Amazon can bring in all that much when they only take as small percentage of each sale. However, what you need to take into consideration is the fact that Amazon has millions of visitors each and every day and countless transactions happening all the time. While their take is indeed small and thus not all that significant to one seller, when you take a few million sales you can begin to grasp just how much money the online selling giant is capable of taking in.

While the company may have started out as a losing enterprise, they have more than made up for their first couple of under the radar years by making vast amounts of money with an ever expanding base of users. As their popularity grows, so too does their market share and the number of users that leave other selling venues such as eBay in order to sell exclusively on Amazon increases by the year.

The company that once only sold only books now sells everything from a thimble to and iPod and is slowly becoming the standard when it comes to places to buy and sell your items online. At the rapid pace of improvement that the company has enjoyed over the last few tears, it is easy to see why they are quickly becoming a household name.