Amazon has grown to be a big online shopping mall that attracts many customers from all over the world. Many of these customers shop on Amazon for cheap prices.
However, if you think about it, Amazon is not as cheap as you may think. Why? See the 9 reasons that make Amazon so expensive. Let’s start with the first one.
9 Reasons Why Amazon Is So Expensive In 2022
Amazon has a wide variety of products at both low and high price points, and can sometimes be expensive due to the third-party marketplace and on-demand shipping options as of 2022. This is especially true for Prime sellers, who might not have a physical store. Amazon has great retention rates so it can charge more and still have customers returning due to the convenience and familiarity.
To learn more about the algorithm behind Amazon’s pricing, and to understand how Amazon’s pricing algorithm contributes to its very expensive prices, keep on reading.
1. Third-Party Marketplace
Marketplace is a service that Amazon offers to sellers where users can buy products directly from the sellers instead of paying for shipping.
When you buy something online from someone other than a company, prices can be more expensive because the seller does not have to make a profit.
In addition, retailers may charge more for some products if they are made of high-quality materials or are relatively hard to find.
Amazon cannot discount items from third party sellers at all, so they are often more expensive than similar products from competitors.
2. Speedy Shipping Service
Amazon’s popularity comes from the fact that they have a fast shipping times and reliable delivery services.
Amazon has made deliveries to the vast majority of the United States through partnerships with UPS and the USPS.
Amazon.com offers a variety of different shipping methods. It can sometimes be more expensive and the shipping methods can be a little confusing.
However, these extra costs are not being passed directly to the consumer and it is a great challenge for a delivery company to try convince a consumer to pay for this convenience.
Amazon even offers weekend and rush delivery for many orders, and these extra options can make it more expensive.
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3. International Shipping
Amazon offers international shipping on many products, such as TVs and phones.
Amazon Global Program ships to more than 100 countries and millions of products are available for international shipping.
Although the company has 110 fulfillment centers in the U.S. and 185 worldwide, there are still costly shipping charges associated with goods being sent across the globe.
You can expect to pay a lot more when you buy something from Amazon that ships from another country or if you want delivery outside the U.S.
4. Product Availability
Because they have so many products to offer for any given niche that they need to make sure that the best selling ones are the ones that you are going to see.
If a product you want is nearly sold out, Amazon can up the price, knowing that determined shoppers will probably pay more for it.
But in some cases, there’s a product that Amazon doesn’t want you to buy.
At the moment, this allows Amazon to be very accurate in the delivery of goods that are shipped.
If the retailer notices that some items are selling faster than others and if the price hasn’t changed for that individual item, there’s a good chance that the price is going to change because of that.
Amazon takes advantage of this and sells its products at a higher-than-average price.
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5. Exclusive Memberships
Amazon has over 200 million people who sign up for the Amazon Prime service. This number is growing everyday.
Memberships provide enticing benefits and exclusive perks, such as free shipping, special discounts, and access to digital reading and streaming content.
Amazon charges $12.99 per month for Prime membership and gives other members access to Prime content at no additional cost.
Even though some people think that membership costs are quite expensive, many people still find membership to be worth it because the perks are well worth it.
Not sure if it’s worth it to just keep a Prime membership, but if you love watching movies and videos on your Amazon’s Fire TV, or listening to music, then Prime is a no brainer.
6. Pricing Algorithms
Amazon is dedicated to technology and price, which allows it to be very flexible and respond quickly to price changes.
Amazon adjusts prices based on when a competitor is performing well or poorly.
You can look for the same piece of furniture from the same maker at different retailers and get a price difference, based on sales volume and reputation.
It also made some smart decisions. [You’re seeing] more brands [sell] through Amazon, [in their] categories and sub-categories and Amazon knows how to advertise to that audience.
Amazon’s technology identifies unique products that aren’t available on other sites, so then the price is increased to reflect the rarity of the item.
The next paragraph explains how Amazon uses prices to distinguish between different kinds of items.
If it’s the only place you can find a product, it’s likely to be more expensive than the same products available in other places.
7. Employee Wages
Amazon’s HQ2 decision is one of the biggest corporate announcements of the year, so we’ve written a lot about it.
All employees of the company, which is a US company, make at least $15 an hour, which is twice the federal minimum wage.
It has lots of people working for it, so it has to pay lots of money to hire lots of people.
Full-time employees also have comprehensive benefits, because of which Amazon has earned a reputation for being a good place to work at.
It is true this means that it can raise its prices but, on the other hand, it also means that it can keep many of its products at a lower price. This is due to the fact that it can continue to receive its higher profits from the higher wages for its workers.
8. Millions of Products
The sheer amount of goods on the Amazon makes it expensive. The sheer volume of goods purchased every day makes Amazon expensive in some areas.
Amazon can make it seem like certain products are more expensive or cheaper, it just depends on how many products are available in each category.
Amazon has the ability to charge a higher price on one product as compared to a cheaper product even when a product is in stock for both the products.
It is very adaptable when it comes to the pricing, so it can adapt to the market and still satisfy its huge customer base.
9. Global Leader
Using brand recognition allows Amazon to set prices that are higher than its competitors and still get more sales.
Amazon recorded a revenue of $34.2 billion in 2020 and continued to creep closer to the top spot on the Fortune 500, trailing only Walmart.
As Amazon is one of the strongest companies among all internet businesses, it’s worth keeping a close watch and investing in it.
I believe that Amazon does not have to worry about any competition because they have so many customers.
Now that you know how to find what you need on Amazon, you can also search for other items that are related to finding things on Amazon, such as what is Amazon’s choice, Amazon’s target market, and why Amazon is so successful.
Conclusion
Amazon also has one of the largest online stores which gives it the upper hand over its competitors.
Its reputation, high-tech pricing algorithms, exclusive memberships, and extensive selection of products makes it more expensive in many ways.
We’re not alone in this strategy. Many companies use their size to drive down prices on their own products to take advantage of their shoppers’ loyalty.
Amazon’s super strong membership base also allows the retailer to charge more and still achieve an impressive sales volume because customers prefer to shop online with Amazon.
Amazon currently faces no major antitrust issues in the US.
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