It’s no secret that Amazon’s Prime shipping program is one of the company’s biggest selling points. For just $99 a year, Prime members get free two-day shipping on millions of items, and in some areas, one-day or even same-day shipping. But how does Amazon make money off of Prime? Surely they’re not making much profit off of the shipping fees they charge.
The answer lies in the fact that Amazon is not just a retailer, but also a logistics company. By signing up for Prime, customers are not only getting a great shipping deal, but they’re also helping Amazon build out its logistics infrastructure. And that infrastructure is what allows Amazon to offer such low prices on so many items.
Think about it this way: if Amazon didn’t have Prime, it would have to charge more for shipping on individual items because it wouldn’t have the same economies of scale. But because millions of people are paying for Prime, Amazon can afford to ship items more cheaply. In other words, Prime customers are subsidizing the shipping costs for everyone else.
Of course, Amazon doesn’t explicitly say this. The company likes to present Prime as a great deal for customers, and in many ways, it is. But it’s also a way for Amazon to get customers to help pay for the company’s expansion.
So, is Prime worth it? That depends on how you use it. If you’re a heavy Amazon shopper, then it’s probably a no-brainer. But if you only shop on Amazon occasionally, you might be better off just paying for shipping on individual items.