How to create a marketplace like Amazon? Complete guide

Summary
"We have chosen to be a company that takes a long view, and we are willing to sacrifice short-term gains for long-term gains." - Jeff Bezos, CEO of Amazon

Creating a marketplace like Amazon is an ambitious project that requires a thorough understanding of the marketplace’s functionality, as well as careful planning and effective execution. This can include building a solid infrastructure for managing products, payments and deliveries, as well as integrating advanced technologies to improve the user experience and reliability of the site. It is also important to develop an effective marketing strategy to attract customers and generate sales. However, with the right tools and expertise, creating a marketplace like Amazon’s can be a realistic project. In this article, we explain how Amazon’s success story came about and how you can use it as inspiration to launch your own site.

Amazon: the rise of a giant of marketplace

Amazon’s journey began in 1994, when Jeff Bezos, then a Wall Street employee, explored investment opportunities. After careful consideration, Bezos decided to enter the online business, a sector he found very promising. On 5 July 1994, he founded a website specialising in online book sales, which he called Amazon, a name chosen to symbolise the world’s largest river and the enormous potential for growth. Although Jeff Bezos started Amazon in his garage, the site quickly expanded its product line to include electronics, toys, clothing and more. In 2002, Amazon created its marketplace, allowing third-party sellers to sell their products on its platform.

Since the marketplace building, Amazon has grown rapidly and continuously, becoming one of the world’s largest online retailers. The company has also expanded into many other areas, such as food delivery, online content streaming services and cloud computing services. There is also a steady investment in technology such as Alexa (2014), its voice assistant and sustainability initiatives.

Over the years, Amazon has expanded its geographic reach and added new products and services. The marketplace has established branches in many countries, offering fast and reliable delivery, even offering delivery by drone (2013). In addition, Amazon has successfully partnered with local companies to strengthen its presence in new markets and offer a wider selection of products to consumers. Overall, Amazon’s international development has been supported by a continued commitment to innovation, diversification of its products and services, and partnership with local businesses. With the strategy advocated by Amazon, it can be expected that the company will continue to play a leading role in online commerce and new digital challenges in the years to come.

How did a site like Amazon become so successful?

When you create a marketplace, you have to bring some new to the costumers. Amazon’s success is attributed to a combination of factors, including an ongoing commitment to technological innovation, top-notch customer service, a wide selection of products, competitive pricing, fast and reliable delivery, and a personalised recommendation system. In addition, Amazon has established a strong reputation for security in online transactions, which has increased consumer confidence.

If we were to summarise them, here are the factors that have made Amazon successful:

  • A wide selection of products: Amazon offers a wide range of products, from electronics to fashion to food and home goods. In addition, it offers a very flexible return policy for customers, which builds trust and loyalty to the brand.
  • Easy-to-use platform: the site has designed an easy-to-use platform that allows customers to quickly and easily find the products they are looking for. Amazon has always been committed to making the online shopping experience easy to navigate and engaging.
  • Fast and reliable delivery: The marketplace has a fast and reliable delivery system in place.
  • Reliable product reviews: Amazon allows customers to leave product reviews, which helps other customers make an informed buying decision.
  • Competitive prices: Amazon often features competitive prices for the products it offers, making it a benchmark for customers looking for deals.
  • Aggressive marketing strategy: Amazon uses a multi-pillar marketing strategy, including personalising offers through algorithms to recommend products to its customers based on their purchase history and browsing behaviour on the site. This ‘targeting’ of consumers includes personalised advertising, partnerships with other companies and special offers for loyal customers.
  • Quality customer service: The platform has a quality customer service department that helps customers resolve problems quickly and efficiently through the use of the latest technology to improve its internal operations.

How does Amazon make money? An effective business model

Amazon’s business model is based on selling products online to end consumers. The marketplace generates most of its revenue by selling products directly to consumers, by allowing other sellers to sell products on its platform in exchange for commissions (either €0.99 each time an item is sold, or a flat fee of €39 per month, regardless of the number of items sold), and by offering services such as premium delivery (Prime) and cloud services (AWS).

The company has also developed other revenue streams by selling online advertising, offering financial services and developing connected speakers and voice assistants. Broadly speaking, Amazon’s business model aims to maximise revenues by directly and indirectly selling products online, offering related services, and developing new sources of technology-related revenue.

In concrete terms, there are 6 key levers that enable Amazon to make money:

  • The Amazon marketplace: The company’s primary revenue stream, Amazon.com accounts for over 50% of its revenue. Basically, as explained above, Amazon takes a commission for items sold or for promoting and advertising sellers’ products;
  • Amazon Prime: This is Amazon’s subscription model. In exchange for a monthly (€6.99) or yearly (€69.90) fee, subscribers have access to the catalogue of streaming videos (Amazon Prime Video) available on the platform. Amazon Prime aims to compete with Netflix in the distribution and exhibition of film and television works. The platform also offers delivery services, unlimited photo storage, e-books, music, games, etc. Prime currently has over 150 million members;
  • Amazon Web Services: This is a low-cost, full-service IT infrastructure platform whose services are contracted by companies, organisations and institutions around the world. It is not the main source of revenue, but it is certainly the most profitable;
  • Amazon Kindle: This is Amazon’s e-reading service, where users can buy, browse and download books, magazines and newspapers available in the Kindle Store. Amazon does not make much money from Kindle, but does drive traffic to the Prime membership plan. In addition, the platform allows independent authors to publish their info-products and e-books, receiving between 30-70% royalties on sales;
  • Patents related to Amazon: The company has over 1,000 patents, many of which are licensed to other companies;
  • Amazon Advertising: The Amazon Ad platform offers sponsored ads and videos. This is a very effective marketing channel, as the audience that accesses the platform is already there with the intention of buying something.

Alternatives to Amazon’s website

There are many other online marketplaces that have been inspired by Amazon’s model, each with its own specialty or niche. Some of the largest global marketplaces are eBay, Alibaba, Walmart, Rakuten and Flipkart. Each of these marketplaces has its own strengths and weaknesses, but they all share the goal of providing convenient and reliable access to a wide selection of products for consumers.

In France there are also many marketplaces modelled on Amazon but with different product orientations and unique marketing strategies. For example, Cdiscount is an online shopping platform that offers a wide range of products, from electronics to fashion. Another example is Fnac which is an e-commerce site that focuses on cultural products such as books, films and music. For their part, Darty and Boulanger are sales sites specialising in electronic products such as televisions, computers and cameras. Finally, there is Conforama: an online shopping site specialising in home products such as furniture, beds and appliances.

If you want to create a site like Amazon, keep in mind that such a venture can be complex and requires careful planning, development and an effective marketing strategy to achieve your business goals. Using a web marketplace agency like Medialem may be the best way to save you money and time. If you want to know more, here are some tips on how to get started with a marketplace or matchmaking platform.

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