13 Reasons Why Amazon Is So Cheap In 2022 (Full Guide)

Amazon is famous for its rock-bottom prices on millions of products, but how does the retail giant offer such discounts? As an online shopping behemoth valued at over $1 trillion, Amazon can leverage its brand recognition, Prime memberships, extensive logistics network, troves of data, and other assets to beat competitors on price.

If you‘ve ever wondered why Amazon manages to sell so many items so cheaply, here are the top reasons behind the company‘s ultra-low prices:

1. Massive Brand Recognition

With a brand value of $315 billion in 2019, Amazon has unrivaled name recognition. Most consumers instantly think of Amazon for online shopping needs rather than smaller niche retailers. This allows Amazon to charge less knowing that millions will shop there regardless of modest discounts.

2. Vast Product Selection

Amazon sells over 12 million products directly and hundreds of millions more through third-party Marketplace sellers. With a near-endless catalog of goods, Amazon can strategically discount select items to drive sales volume and traffic while recouping any losses across less discounted products.

3. Amazon Prime Memberships

Amazon has over 200 million Prime members worldwide. These loyal customers get perks like free delivery and access to movies/shows, which creates incentive to shop on Amazon for discounted items. Lower prices help satisfy Prime members and retain their $139 annual subscriptions.

4. Expansive Delivery Infrastructure

With 110 active fulfillment centers in the U.S. and over 185 globally, Amazon has an unparalleled delivery network. This supports discount pricing since Amazon can quickly deliver discounted products at low operational costs due to economies of scale.

5. Daily Deals and Discounts

Amazon generated over $837 million in revenue every minute in Q1 2021. With profits this high, Amazon can easily offer flash sales, coupons, and promotions to engage customers without hurting its bottom line. Cheap prices drive higher purchase volume.

6. Cutting-Edge Pricing Algorithms

By monitoring competitors, sales data, profits, and demand, Amazon‘s innovative algorithms adjust prices dynamically across millions of items. Automated systems allow Amazon to tweak prices frequently to undercut competitors and meet demand.

7. Unmatched Convenience

Online shopping is inherently more convenient than brick-and-mortar stores. Amazon offers further convenience through features like 1-click ordering. Lower prices help justify the convenience since shoppers can access discounted items from anywhere.

8. Amazon Private Label Brands

Amazon Basics provides discount prices on popular products that Amazon sources directly from manufacturers. As a private label, Amazon can control pricing and realize higher margins even at low price points.

9. Proprietary Tech Infrastructure

As a technology company, Amazon uses its tech expertise to optimize pricing and operations. Automation, supply chain tools, analytics systems, and more help Amazon reduce costs that are passed on as consumer savings.

10. Lean Overall Operations

Thanks to technology integration, process optimization, and automation, Amazon maintains lean, low-cost operations. For example, fulfillment center robots and automation reduce expenses. These cost savings allow discounted pricing.

11. Customer Loyalty and Trust

Decades of reliable service, benefits like free returns, and initiatives like the Climate Pledge have earned Amazon strong customer sentiment. Shoppers trust Amazon for good prices and are loyal to the brand.

12. Third-Party Marketplace Competition

With over 1.9 million sellers on Marketplace, pricing is extremely competitive. To attract customers, sellers must constantly adjust prices. Lower prices prevail since undercutting competitors is the easiest way to drive sales.

13. High Sales Volumes

Whereas a small retailer relies on profits from a handful of items, Amazon sells millions of products daily across all categories. Even if profit margins are slim on discounted goods, massive overall sales volume offsets low margins.

In summary, Amazon can leverage its brand authority, operational scale, loyalty programs, Technology, and passion for customer obsession to offer the lowest prices on a vast range of convenient-to-access products. For shoppers, it means more savings. For Amazon, it translates to more sales and growth.