Amazon.com Inc., the largest online retailer in North America and Europe, has released its 2016 annual report. Data in the report shows where and how Amazon generates revenue, and the contributions of each business segment.
By key geographic market
Amazon generates two-thirds of its total revenue from its business interests in the United States, including its retail business, marketplace, seller services and its computing business, Amazon Web Services. Amazon’s next-largest markets for sales are Germany, Japan and the United Kingdom.
By business segment
Retail products Amazon sells directly to consumers (where Amazon is the seller of record) accounted for $91.43 billion of Amazon’s 2016 revenue, or 67.2%.
Revenue generated as a result of the services it offers other online merchants (third-party seller services) accounted for $22.99 billion in revenue, or 16.9%. This includes the commission Amazon collects on each good sold by a marketplace seller on Amazon. Commission rates vary by product type from 8% to 25%, with most product categories at 15%. In other words, for a $100 sale by a marketplace seller, Amazon collects $15. Third-party seller services also includes revenue coming from Fulfillment by Amazon, in which merchants pay Amazon to store and fulfill orders on their behalf.
Amazon Web Services (AWS) is Amazon’s rapidly growing and highly profitable (see next chart) cloud computing business. It accounted for $12.22 billion in revenue in 2016, up 55.1% from $7.88 billion in 2015. Retail subscription services revenue includes membership dues paid for Prime and other subscription services, such as Amazon Music, Amazon Video and Audible.
The “other” sales category is Amazon’s smallest, but it also grew the fastest year over year. “Other” includes revenue from Amazon’s growing advertising services business, as well as its co-branded credit card agreements. Other revenue grew 72.5% last year.
Overall, Amazon’s sales grew 27.1% last year. Its net income climbed nearly 300% to $2.37 billion from $596 million in 2015.
Revenue and operating income
Amazon’s retail business brings in scads of revenue, but it also costs a lot to run. Despite accounting for just 9.0% of revenue, Amazon’s computing business, AWS, accounts for the greatest amount of operating profit before interest and taxes. The North American retail and services businesses are profitable, but Amazon’s international segment operates at a loss.