What is Amazon's Business Model & Why Is it Being Regulated?

Amazon's market capitalisation reached $2.47 trillion by the end of 2025 and the world's largest online retailer continues to throw the business rulebook out the window and dominate new markets.

The tech giant is the brainchild of Jeff Bezos — an American entrepreneur with a grand vision to build the "everything store." After its humble beginnings as an online book store in 1994, Amazon has branched in all directions to become a jack of all trades and a master of (almost) everything.

As you would expect, companies of this size are bound to come under scrutiny. Many critics fear the tech giant has unfair control over its markets — making Amazon an unstoppable force with no ceiling.

So, is Amazon's business model sustainable and what are regulators doing to curb its hunger for market domination?

Join us as we investigate the Amazon business model under the microscope. We'll review potential problems with Amazon and discuss why and how regulators are encouraging fair competition among smaller online retailers.

What Does Amazon Do?

While most people think of Amazon as everyone's favourite place to grab a bargain, the tech giant is a much more complex and multifaceted machine than meets the eye. Once we peel back its many layers, a carefully-planned chain of events spanning over 30 years have led to Amazon's incredible success.

Bezos once explained that "three big ideas" fuelled Amazon's growth: put the customer first, invent new products, and be patient.

Ever since the early days in Bezos' Seattle garage, Amazon has always been about waiting for the right time to release innovative customer-oriented products. Bezos ignored what everyone else was doing, and instead, focused on the power of Big Data to create hyper-personalised products for his customers.

"Don't worry about competitors because they're never going to send us any money. Let's be worried about our customers and stay heads-down focused." — Jeff Bezos

That customer-first philosophy runs deep in Amazon's culture — and it's something our bootcamp alumni who work there feel every day. Ezinne, a Senior Product Manager for Alexa AI who studied at Judge Business School, puts it plainly: "The role is not about you, it's about your customer. Get close to your customers and make decisions every day that get your product closer to fulfilling their needs."

The Amazon Timeline

The best way to understand Amazon and how it came to be is to rewind to 1994.

The fresh-faced Princeton University graduate identified books as an established market in need of a fresh lick of paint. There were only two major US book distributors at the time — none of which had committed to online retail.

Bezos rallied a crack team of data scientists to understand who their customers were and why they behaved as they did. While most online booksellers struggled to manage inventories, Amazon's superior data analytics meant they could predict what their customers wanted, sometimes before the customer knew themselves.

Former Head of Amazon Services, James Thomson, explains how the tech giant can "anticipate which brands customers are going to need in three to six months when they're ready to 'unexpectedly' buy those products."

Amazon's Secret Weapon: Using Data To Create Value

The cornerstone of Amazon's success is its fascination with clickstreams — the digital breadcrumb trails left by users as they navigate through a website. Even in the very early days, data scientists analysed clickstreams to paint an accurate image of each customer and tailor individual experiences to build a personalised shopping universe.

One of the company's first recruits, David Selinger, explains that "every mouse click and every twist and turn through the website was itself a commodity."

Amazon's obsession with using data to drive the customer experience was the secret ingredient to Amazon's recipe for success. And that data culture hasn't dimmed — if anything, it's intensified. Cyprien, a Strategic Sales Account Manager at Amazon Ads and Exactimo bootcamp alumnus (MSc, Imperial College Business School), describes it as one of the defining features of life inside the company: "Amazon's culture of data means having access to advanced tools and insights to craft bespoke narratives for each campaign and demonstrate measurable impact across all channels almost immediately."

Once they could leverage customer data to add value to customer experiences, Amazon was well on its way to becoming a commercial behemoth. Just like Google's business model, pinning value to data created a flywheel effect: enhanced customer experiences led to millions of loyal customers; more data created more efficient warehouses, which lowered prices further; better prices and relevant stock increased customers — and so on.

Today, Amazon has turbocharged this flywheel with AI. The company's faster delivery network is now powered by AI models that forecast product demand and placement across its fulfilment network, allowing it to store items closer to customers.

Amazon is also pushing into 'zero-click shopping,' where customers receive automatic deliveries of household essentials based on predictive experiments using its vast repository of customer data.

Besides enhanced customer experiences, Amazon's data-centric business model also provides exciting opportunities for businesses to launch hyper-personalised ad campaigns. Amazon's advertising revenue reached $68.5 billion in 2025, a 21.8% increase on the previous year — more than the combined revenues of many major digital platforms.

What Is Amazon's Business Model?

While Amazon initially rose to fame as an online retailer, today's multi-trillion-dollar valuation is fuelled by annual revenue of $716.9 billion in 2025, a 12.38% increase year-over-year. That success is thanks to its diverse but interconnected portfolio of business ventures and revenue streams. Amazon's business model consists of four core components:

1. Online Stores

Instead of building enormous inventories to stock every product under the sun, Amazon developed an outsourced e-retail solution to maximise growth. Back in 2001, the bright-eyed retailer joined forces with its biggest competitors by convincing them to sell their products on Amazon's website.

Big names included Target, Marks & Spencer and even Waterstones — all of whom were new to e-commerce and wanted to make a quick buck from the new kids on the block.

Little did they know, Amazon was using these sales to collect tonnes of valuable data and build sophisticated customer profiles. While the other retailers benefited from increased sales in the short-term, they were shooting themselves in the foot by handing over intellectual property to their biggest competitor. Author of 'Think Like Amazon', John Rossman, explains that these companies were "giving away the keys to a kingdom."

The second string to Amazon's e-retailer bow involves listing products from smaller third-party retailers. Third-party sellers now represent 61% of all units sold on Amazon as of Q4 2025, with full-year third-party seller services revenue hitting $172.2 billion in 2025. There are approximately 1.9 million active third-party sellers worldwide, with Amazon attracting around 550 new seller registrations every single day.

The engine that powers its "everything store" is an algorithm called A9, which ranks products based on their purchase likelihood. Companies that list products on the platform must understand how to optimise for purchase likelihood by choosing the right keywords, images and sales copy.

Adjacent to Amazon's online marketplace is the world's fastest-growing delivery and distribution network. Amazon delivered over 13 billion items worldwide to Prime members either the same day or the next day in 2025, marking its fastest delivery speeds ever for the third consecutive year. Prime members worldwide saved an estimated $105 billion on fast, free delivery in 2025, with the average US member saving $550 — nearly four times the annual cost of a membership.

Keeping this network running at scale requires serious operational horsepower — and smart people to manage it. Varun, a Product Manager at Amazon (MBA, Imperial College), works inside the transportation network itself: "Amazon has a complex transportation network, which consistently experiences optimisation-driven changes. The impact of these changes need to be assessed based on different KPIs — solving for a complex space involves strategic and tactical nuance, which is what my day-to-day within network design entails." It's a reminder that beneath every lightning-fast delivery is a web of product decisions being made in real time.

2. Amazon Web Services (AWS)

As Amazon's online dominance grew, so did its technical know-how and operational capabilities. AWS involves selling and licencing web servers, on-demand cloud computing and Application Programming Interfaces (APIs) for businesses to increase their computing power.

Some of Amazon's biggest competitors are reliant on Amazon's servers to keep their entire operation afloat. Whether it's watching your favourite shows on Netflix, buying online groceries with Sainsbury's or downloading games from the App Store, AWS is the secret weapon behind it all. AWS even runs the servers for the CIA.

For the full year 2025, AWS revenue reached $128.7 billion, an increase of 20%, while operating income climbed to $45.6 billion — reinforcing the division's role as Amazon's most lucrative business. AWS represented about 17% of Amazon's total revenue in Q4 2025, but accounted for the majority of the company's profits.

Increasingly, the real battleground within AWS is artificial intelligence. Our bootcamp alumna Silvia, Head of GenAI and ML for Financial Services across EMEA and APJ Global Accounts (MBA, London Business School), sits at the frontier of this shift: "I am responsible for shaping and implementing the GenAI and AI strategies for the Financial Services industry. I play a crucial role in helping customers understand the nuances of these innovative technologies and their applications, as well as providing guidance on large-scale implementation."

On the ground, that translates into real business transformation. Alessandro, a Business Development Associate at AWS and Exactimo alumnus (BSc, Warwick Business School), works directly with CEOs and CTOs across Germany and Switzerland: "I help businesses understand how they can leverage AWS's cutting-edge AI services to transform their operations — from implementing AI-driven personalisation for a major airline's loyalty programme to introducing IoT solutions that digitalise sports venues and enhance fan experiences."

3. Subscription Services

Amazon has ventured into the world of TV, music and even groceries to fulfil Bezos' vision of becoming the 'everything store.' The tech giant is building a subscription-based empire to add value to people's lives in every possible direction.

Amazon Prime has grown to 260 million subscribers worldwide, with 185 million in the US alone. Prime connects customers with an entire network of services to cement their loyalty with the Amazon ecosystem — from Prime Video, which now reaches an average ad-supported audience of 315 million viewers globally across 16 countries, to Amazon Pharmacy, which now offers same-day prescription delivery to remote locations across the US.

Charlie, a Senior Business Manager at Amazon and Exactimo bootcamp alumnus (MBA, IESE), sees this ecosystem expansion from the inside — working with senior stakeholders across major industries to help them navigate their own innovation journeys: "The best thing about the role is getting to work with senior stakeholders at amazing companies across a range of industries and help them transform their business." It's a neat reflection of Amazon's own approach: always pushing into the next frontier of what 'service' can mean.

4. The Internet of Things (IoT)

Unless you've been hiding under a rock, you'll have heard of a lady called Alexa living in homes across the world. Products like Amazon Echo and Amazon Ring serve to blur the line between online and offline by entwining the internet with our everyday lives.

Whether it's asking your virtual assistant to set a reminder or leaving a voice note for your delivery driver, the Internet of Things opens doors to more customer data and fuels growing dependency on the Amazon ecosystem.

Our bootcamp alumna Ezinne, Senior Product Manager for Alexa AI at Amazon, works at the very heart of this product line: "Being able to combine creativity, strategy and AI technology to create products that directly impact the lives of millions of customers is what makes the role so compelling." Amazon is now doubling down on ambient AI, embedding large language models directly into Alexa to make interactions more conversational, contextual and commercially powerful than ever.

Amazon also has serious ambitions in autonomous mobility and logistics. Its Project Kuiper satellite internet network is launching to bring connectivity — and a captive new customer base — to underserved regions around the world. And as Max, Head of Trade Advisory at Amazon and Exactimo alumnus (MBA, INSEAD), knows all too well, the complexity of operating at global scale is a discipline in its own right: "International trade is at the intersection of many complex, compelling fields: operations, law, regulation, compliance, public policy and geopolitics. How can you future-proof your international operations? How can you turn challenges into opportunities? Those are the things we work on every day."

Why Is Amazon Being Regulated?

One of the biggest challenges faced by Amazon is overcoming government regulations on the technology industry. Just as Meta and Google have come under fire from anti-monopoly laws and data protection scandals, Amazon is feeling the heat.

The cornerstone to almost any issue about regulating big tech is data. As Amazon continues to build accurate user profiles and understand people's most intimate desires, what steps are they taking to protect the privacy of their customers?

As Amazon's first Chief Scientist, Andreas Weigend, explains: "We didn't think of [customer profiling] as exploiting, we thought about helping people make better decisions."

So, is Amazon's business model sustainable and why are regulators concerned about their growing dominance? Let's take a look at some of the most hotly-debated Amazon regulatory issues:

Manipulative consumer practices. In September 2025, the FTC secured a historic $2.5 billion settlement against Amazon — the largest ever obtained by the FTC — over allegations that the company misled millions of consumers into subscribing to Amazon Prime and then made it unreasonably difficult for them to cancel, in alleged violation of the FTC Act. The settlement is only phase one of the FTC's legal campaign against Amazon, with a full monopolization case still to come.

Antitrust scrutiny of the marketplace. The FTC and the attorneys general of 17 states — later joined by Vermont and Puerto Rico — sued Amazon, accusing the online retailer of raising prices and creating monopolies by, among other things, altering organic search results to show paid advertisements or Amazon's own products, and overcharging online sellers.

Data Protection. Following a number of ongoing antitrust inquiries across the world, Amazon faces persistent scrutiny over allegations that it harvests data from third-party sellers to make low-cost versions of popular products — effectively using small businesses as a research-and-development arm. 50% of third-party online retailers that sell with Amazon say Amazon sells products that directly compete with theirs.

Environmental Impact. As companies worldwide face pressure to reduce their carbon footprint, Amazon's vast logistics and data centre operations remain under scrutiny. Amazon has committed to net-zero carbon by 2040, but with CEO Andy Jassy confirming plans to invest approximately $200 billion in capital expenditure in 2026, primarily in AWS infrastructure, the energy demands of its AI-driven cloud empire are only growing.

Controlling the competition. Many smaller retailers believe Amazon has unfair control and monopolisation over the e-commerce space. Companies must pay to increase the visibility of their products on Amazon — forcing small retailers to choose between sales figures and profit margins. Regulatory watchdogs on both sides of the Atlantic continue to investigate Amazon's treatment of third-party suppliers to promote fair competition.