When internet retailers first came out, obstacles like high shipping rates and slow logistics made selling online expensive. Customers only expected to buy higher-margin products like clothing, accessories, electronics, and sometimes takeout foods. Things like tissues, soap, juice – everyday necessities and generic health products – would be bought at the local supermarket or wholesale. That is until Amazon came out and transformed online shopping.
Amazon practically invented the idea of cheap shipping for online purchases, especially with its Prime memberships, which offer free two-day shipping). The company made this possible through the sheer amount of sales and dedicated logistics warehouses.
When running a business that has many complicated shipments – such as many international customers, a lot of different products (versus a lot of the same item), or small items – often have problems with shipping efficiently. However, when you have economies of scale, things get much cheaper.
Now consumers can get the cheapest deals on anything compared to brick-and-mortar stores. But how are companies able to sell so cheap and still have revenue? Welcome to Amazon Marketplace.
Normally when looking at an Amazon listing, all you see is the product and a price (+shipping). However, what’s happening behind the scenes is a bidding competition between multiple vendors, each aim for the “buy box”, where the cheapest price wins the customer.
What’s not often known is that many generic products and brands of everyday items have multiple suppliers working for them, instead of just one big factory producing everything. Amazon then takes these and sell them under the same class or name.
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