Amazon is one of the most admired companies in the world and a wildly popular place to shop online with millions of products and retailers.
If you’ve ever shopped on Amazon, you’ve probably noticed the low prices and huge selection. But why is Amazon so cheap? Here’s what I discovered!
Key Takeaways
13 Reasons Why Amazon Is So Cheap In 2022
Amazon has some of the cheapest prices on a wide range of products because it’s such a massive company. Amazon can sell a mass quantity of items at lower prices and still turn a profit. Plus, Amazon has extensive tracking technology and data to ensure its prices are lower than other competitors in the digital market.
If you’re curious about Amazon pricing and why you can get so many things at great prices, then keep reading.
1. Brand Recognition
It’s safe to say shoppers recognize Amazon. It surpassed Apple and Google to become the most valuable global brand in 2019.
With a brand worth over $315 billion, Amazon has the upper hand when it comes to brand awareness and recognition.
Because so many shoppers know about Amazon, the company can charge less for its products, knowing people are going to come and shop anyway.
2. Extensive Catalog
Speaking of brand recognition, Amazon is known for its huge selection of products.
Other retailers just can’t match the array of goods and services available all in one place on Amazon.
Due to the 12 million Amazon-branded products, plus millions more from third-party sellers, Amazon keeps prices low because sales will be high no matter what.
They can lower prices on hundreds of items while increasing prices on others, and most consumers won’t even notice because the catalog is that big.
3. Membership Options
There are around 147 million Amazon Prime members in the U.S. and 200 million total around the world.
Prime membership has its perks, like free delivery, discounted prices, and access to exclusive digital services.
Thanks to this strong and loyal member base, Amazon is able to charge less for certain products without losing money.
With millions of people ordering off Amazon every day, a slightly lower price doesn’t put a big dent in the bottom line, which isn’t always the case for smaller retailers.
4. Huge Delivery Network
Amazon’s delivery network continues to grow. There are 110 active fulfillment centers in the U.S. and a total of 185 around the globe.
Over a million packages are shipped every day, so you can imagine how busy Amazon delivery drivers are.
When you think about the demand for Amazon goods and services, it makes sense that they are priced lower.
Amazon can reach shoppers almost anywhere in the country, with numerous products other retailers can’t deliver as quickly.
Amazon makes the most of this demand, charging less for products that people need, knowing they will quickly make up the discount.
5. Daily Discounts
Who doesn’t love a sale? Amazon has plenty of discounts, and the company is happy to put items on sale because it actually encourages people to buy more.
In the first quarter of 2021, Amazon recorded an eyewatering revenue of $837,330.25 every minute. That’s more than Apple, Alphabet, Microsoft, Facebook, Tesla, or Netflix.
With such a high revenue and dominance in the digital market, Amazon can maintain low prices and keep customers happy and engaged through discounted deals.
6. Detailed Data
Amazon has the upper hand in terms of the sheer number of customers.
While a lot of consumers have a favorite store to shop in-person near their house, Amazon covers the entire country and offers a one-stop-shop solution for things you can’t find elsewhere.
Considering the company’s popularity and simple shopping setup, Amazon can track analytics from millions of customers.
They know what people are shopping for and what they aren’t buying, which allows them to drop prices accordingly to encourage more sales.
Simply put, it’s easier for Amazon to sell items cheaper than it is for smaller competitors.
7. Convenience
Amazon is preferred by many people because it’s easier. Rather than packing up the kids, getting in the car, driving to the store, and shopping that takes several hours, Amazon can be done in minutes.
Amazon keeps prices low because it’s a big part of the appeal. Consumers want to order from their phone, tablet, or computer quickly and affordably.
8. Private Label
Amazon Basics is Amazon’s private label brand featuring in-demand household goods and office supplies.
Amazon buys these products in bulk orders from the manufacturer, then sells and packages them under the Amazon Basics brand.
The private label is competitively priced and allows Amazon to profit significantly from the most popular products people are searching for.
Not all companies have the opportunity to run a thriving private label with low prices like Amazon, so the tech giant definitely makes the most of it.
9. In-House Tech
Yes, Amazon is a technology company, so the retail side certainly benefits. Amazon keeps a close eye on competitors and uses algorithmic pricing to offer the best deals to customers.
Amazon’s innovative technology monitors competing prices, stock levels, profitability, and demand to quickly adjust prices on millions of items.
Round-the-clock repricing to meet demand and stay in front of the competition gives shoppers the benefits of stocking up on their must-haves without blowing their budget.
10. Low-Cost Operations
Another reason why Amazon is so cheap is the efficient, low-cost operating model.
Yes, Amazon may have a lot of employees, and pay $15 per hour, but overall the company’s operations are ultra-effective and efficient.
The operational cost savings are passed on to consumers through some of the lowest prices on popular products. Amazon can sell for less because it operates for less.
The company incorporates automated technology into storage, selection, packaging, and delivery, which supports low prices and operating costs.
11. Trusted Reputation
Amazon works hard to maintain a good reputation, and their overall impact on the community and economy means many customers are happy to shop with Amazon.
Think of it this way: if you had to choose between shopping on a platform you know and trust, like Amazon, or a new website with just a few products and long delivery times, what would you do?
Most people would opt for the reputable, recognized choice on Amazon. With strong consumer confidence, Amazon can charge minimal prices for its items and keep making money anyway.
12. Third-Party Marketplace
There are more than 1.9 million small and medium-sized sellers on Amazon Marketplace.
This third-party marketplace creates a hugely competitive environment, which naturally drives prices down as sellers compete for customers.
For example, if there are 10 companies selling friendship bracelets on Amazon, and all of the products seem about the same quality, most consumers will go for the lowest price.
If Amazon sellers want to stay in the race, they need to be priced competitively.
13. High Volume
Amazon has huge stock volumes and millions of products going in and out every day.
This supports low prices because Amazon doesn’t have to worry about making a profit on a small set of 10 items.
Amazon is focused on the bigger picture, and not a lot of smaller retailers can say that.
At the end of the day, even if Amazon makes a minimal profit on a particular item, they are still generating such high revenue overall, it evens out.
Thanks to a significant volume of products and sales, Amazon has greater flexibility with low prices.
If you are looking to learn more, you can see our related posts in the other stores on 13 reasons why Walmart is so cheap, 13 reasons why IKEA is so cheap, and 17 reasons why Aldi is so cheap.
Conclusion
There are many reasons why Amazon is one of the cheapest mass retailers in today’s world. Amazon has a unique advantage as a tech powerhouse with incredible recognition.
Most consumers in developed countries have at least heard of Amazon, if not shopped there regularly.
Amazon capitalizes on low-cost operations and a huge selection of millions of items to keep prices low and consumers happy. With competitive pricing that beats out m