Amazon Web Services (AWS) in 2024 represents only 15% of the net sales of Amazon but provides almost 58% of its operating income. The figure alone gives you nearly all the information you need to know about the business model of the company: The largest online retailer in the world is not making its profits by selling products, but running the cloud infrastructure behind other thousands of companies.

This dual structure — e-commerce at scale and cloud services at high margin — is what makes Amazon so dominant. On one side, the retail arm pulls in huge volumes of revenue through its marketplace, Prime memberships, advertising, and fulfilment services. On the other, AWS quietly generates the bulk of the company’s profits, funding Amazon’s endless reinvestment into logistics, devices, and digital media.

Understanding how these two engines work together is the key to understanding Amazon’s success. The company has built a model that combines scale, diversification, and integration — where each part of the business strengthens the others. Retail creates reach, AWS creates profits, and Prime ties it all together.

In this article, you’ll see exactly how Amazon’s business model works. You’ll learn how e-commerce and cloud services dominate the market, how revenue and profits split between them, and why this hybrid approach is so hard for competitors to match.

What Is the Amazon Business Model?

Fundamentally, Amazon business model is based on the combination of scale, diversification, and customer obsession. Amazon does not have to depend on a single product line or source of revenue as compared to the traditional retailers. Rather, it is a hybrid model which is an integration of retail, marketplace services, subscriptions, cloud computing and digital products.

Here's how it breaks down:

1. Online Retail (Direct Sales): Amazon sells products directly to customers, acting as a traditional retailer. This generates huge revenue but usually low profit margins.
2. Marketplace (Third-Party Sellers): Marketplace (Third-Party Sellers): Amazon hosts millions of sellers of products. Amazon makes money on these transactions and provides fulfilment through FBA ( Fulfilment by Amazon).
3. Memberships and Subscriptions: Amazon prime is the most apparent in this category, creating the effect of loyalty and re-buys and streaming deals as well as exclusive offers.
4. Subscription Services: Amazon Prime is the most visible here, driving loyalty and repeat purchases while also providing streaming and exclusive deals.
5. Amazon Web Services (AWS): The company’s high-margin cloud arm powers websites, apps, and businesses worldwide. This is Amazon’s most profitable segment.
6. Advertising & Digital Media: Sponsored product listings, Fire devices, Alexa, Kindle, and content all add additional layers of income and ecosystem lock-in.

What makes Amazon unique is how these different pieces interlock. Retail attracts buyers, Prime maintains their satisfaction, AWS offers for cash flow, and advertising increases competitiveness of sellers. They combine to create a self-reinforcing system, which is hard to imitate by competitors.

Concisely, the business model of Amazon is not only selling goods online. It's about creating a multi-faceted ecosystem in which all the elements of the business reinforce each other - and therein lies the true key to its worldwide success.

How Does Amazon Make Money?

Amazon earns money through a combination of high-volume retail and high-margin services. While most people know it as the world’s biggest online shop, the truth is that much of Amazon’s profit comes from areas outside its retail business.

Here are the main revenue streams:

1. Retail Sales (First-Party and Marketplace)

Amazon retailing is a first-party retailer, but the company also hosts millions of third-party sellers on its marketplace. This is especially lucrative in the marketplace since Amazon gathers referral charges, fulfilment charges and advertising income devoid of the inventory risk.

2. Amazon Web Services (AWS)

AWS provides cloud infrastructure to businesses of all sizes. It represents about 15% of total net sales but nearly 58% of operating income, making it Amazon’s most profitable segment. AWS’s margins allow Amazon to reinvest heavily into its retail operations.

3. Subscription Services

Amazon Prime membership is a recurring revenue stream. Beyond shipping benefits, it includes video streaming, music, and exclusive deals. Subscriptions improve loyalty and increase customer lifetime value.

4. Advertising Services

Sponsored product listings and display ads on Amazon’s marketplace bring in billions. In fact, Amazon’s ad business has quietly become its third-largest revenue stream, competing with Google and Meta.

5. Other Segments

The other products that Amazon earns are devices (Kindle, Echo, Fire), digital content, and physical stores (such as Whole Foods and Amazon Go).

In a recap, Amazon is applying the low-margin retail reach and high-margin cloud and advertisements profit-making model. This leverage is the reason why Amazon can grow in such an aggressive way and invest in new ambitious projects.

The Dual Engines: E-Commerce and AWS 

There are two engines that make Amazon run e-commerce and AWS (Amazon Web Services). Each of them contributes to a different part, but they all provide the balance that is making Amazon dominating the globe.

1. E-Commerce: Scale and Reach

1. Amazon dominates the U.S. e-commerce sector taking the lead over Walmart, eBay, and Shopify with the share of approximately 38 %.
2. Brings together the first-party retail (Amazon selling directly) and third-party marketplace vendors.
3. Speed and convenience are guaranteed through logistics, fulfilment centres and Prime shipping.
4. Many sellers work with an e-commerce development company to integrate their stores into Amazon’s marketplace.

2. AWS: Profit and Innovation

1. AWS contributes just 15% of sales but ~58% of operating income — the profit engine of Amazon.
2. Offers cloud computing, storage, AI, and hosting to start-ups, enterprises and governments.
3. Forms the basis of the modern internet in many areas.
4. An AWS development company is commonly contracted by businesses to migrate, optimise or develop apps on AWS.

The Balance

1. E-commerce = volume (drives customer traffic and loyalty.)
2. AWS = margin (generates cash flow and funds Amazon’s expansion.)

Together, they create a self-reinforcing cycle: retail brings reach, AWS brings profit, and both fuel growth.

Revenue Breakdown: Retail vs. Cloud

Amazon’s financial model shows a clear divide: retail dominates revenue, while cloud dominates profit. To understand this, it helps to look at the numbers.

1. Retail Revenue

Amazon’s retail arm (North America + International) remains the largest contributor to net sales. This includes direct product sales, marketplace fees, and subscription services. Retail is the engine that drives scale, traffic, and customer loyalty.

1. ~70–75% of total revenue comes from online stores, physical stores, and third-party seller services.
2. Margins are thin due to high operating costs (logistics, fulfilment, and competitive pricing).
3. Subscriptions like Amazon Prime boost recurring income but are tied closely to retail activity.
4. Retail is vital for market share dominance but not the main source of profits.

2. AWS Revenue

AWS is a smaller slice of sales but the heavyweight in terms of earnings. It’s the profit engine that keeps Amazon’s ecosystem expanding.

1. ~15% of net sales but nearly 58% of operating income.
2. High-margin services: cloud hosting, storage, AI, and SaaS offerings.
3. Revenue growth remains strong as more companies move to the cloud.
4. The AWS revenue breakdown shows steady double-digit growth year over year, outpacing retail growth.

Key Takeaway: Amazon’s income streams reveal a simple truth: retail creates volume, AWS creates profit. This duality allows Amazon to scale its customer base while funding innovation, acquisitions, and long-term bets.

How to Make an E-Commerce Company Like Amazon

The story of Amazon, which started as a web-based bookstore, but now a global marketplace demonstrates to the world what can be achieved with a proper vision and action. Although it is almost impossible to replicate the scale of Amazon, you still can emulate its business model to establish an e-commerce company. Among the main steps that should be taken in order to develop an E-Commerce company as Amazon.

Key Steps to Build an E-Commerce Business Like Amazon

1. Choose the Right Business Model: Will you sell your products directly (retail) or will you be a marketplace that calls on third-party sellers, or will you be a hybrid like Amazon.
2. Invest in Technology: There should be a strong platform. A good percentage of startups outsource to an e-commerce development firm to develop scalable sites, add payment systems and manage heavy traffic.
3. Focus on Logistics: Fast and reliable shipping is a major competitive edge. Build partnerships with logistics providers early, and scale into warehousing and fulfilment as demand grows.
4. Customer Experience First: Amazon thrives on convenience. Offer easy navigation, clear returns policies, and personalised recommendations.
5. Expand Revenue Streams: Don’t rely only on product sales. Explore subscriptions, advertising, or even digital services to diversify income — just as Amazon did with Prime and AWS.
6. Leverage Data: Use analytics to understand buying habits, improve inventory management, and tailor marketing campaigns.

The billions of Amazon are not required to compete. Focus on customer trust, smart technology investments, and slow diversification is what you need. Begin with a niche, grow slowly, and create an ecosystem that will ensure repeat buyers.

Marketplace + Retail + Cloud: Understanding the Hybrid Model

In order to get a clear picture of the hybrid business model of Amazon, it can be considered as three layers collaborating with each other and this is the Marketplace, Retail and Cloud. All the layers play their own part but the true strength lies in the manner in which the layers complement each other.

Take the Marketplace first. Millions of independent sellers list their products on Amazon. These sellers bring variety and scale that no single retailer could manage alone. Amazon charges them fees and often persuades them to use Fulfilment by Amazon (FBA) — which locks sellers deeper into its ecosystem.

Then comes Retail. Amazon itself sells everything from books to electronics, operating like a traditional store but with unmatched logistics. The retail side builds trust: customers know they’ll get fast delivery, easy returns, and competitive prices. That reliability makes them comfortable buying from third-party sellers too.

Finally, there’s Cloud (AWS). The AWS profits are not enriching the bottom line of Amazon; they are reinvested in the growth of fulfilment centres, the creation of new technology and even the exploration of devices such as Alexa and Kindle.

It is this hybrid model that makes Amazon special. Marketplace creates volume, Retail creates trust, and Cloud creates funds innovation. Combined, they form a chain of self-reinforcing, a loop of such that it would be almost impossible to have competitors as extensive and robust as Amazon.

Conclusion: The Future of Amazon’s Business Model

The Amazon business model summary reveals a simple but powerful truth: Amazon dominates because it combines two engines — e-commerce for scale and cloud services for profit. Retail, marketplace sellers, Prime and advertising form a huge customer-seller ecosystem. Concurrently, AWS generates the high-margin revenue which drives further investment in logistics, technology, and innovation.

This balance explains why Amazon continues to lead. Its e-commerce approach guarantees market share, and its cloud approach leads to a sustainable growth. The combination makes Amazon resistant to its competitors who usually perform well in only one area.

In the future, Amazon is expected to continue their business model by incorporating more AI usage, accelerated logistics, and diversification into other areas such as healthcare, fintech, and international streaming. Nevertheless, the main rule will remain the same: diversification and synergy are the powers of Amazon.

For anyone studying business models, Amazon proves that success doesn’t come from one revenue stream — it comes from building an ecosystem where every part supports the others.