Here is the reason why Amazon does so well. All the product is the same as what all their competitors sell. They pay more for it then their competitors pay. Also they can sell it cheaper.
They can do this for two reasons.
First, if it cost $3 to make a product and a store buys it for $5 then it's sold in the store for $20 dollars. You just made a 300% profit. That's why you see sales all the time because they still will make a 120% to 200% profit. Then customers say how can they stay in business.
Amazon does it better then this. They will buy the product for $7 and sell it for $18. Which brings in more customers. Then offer free shipping because it cost them almost nothing because they are one of UPSes biggest customers and get a good rate.
Second, Amazon does what most of what their competitors do not. They sell online with out having a store front. You look at all their competitors and they have 200,000 to 500,000 employees where Amazon has 97,000.
This is is why the can stay competitive while having a low margin.
Not quite.
Amazon pays the same or less for product as their consumers, since economies of scale will work in their favor. Low overhead is the key to their business. When Best Buy purchases a shipment of televisions, it needs to move them to regional distribution centers, then to local distribution centers, then to stores. It needs to pay for the construction (which is a hectic, costly process itself) & continuing refurbishment of stores, real estate taxes, utilities, employees, TV commercials, sales circulars, "display" merchandise, etc. At the end of the model's life, Best Buy needs to invest in a reverse logistics system to return product to the manufacturer or designated clearance centers. Meanwhile, Amazon exclusively maintains a virtual sales front and its not uncommon for the televisions to sit in the manufacturer's' warehouse until they're sold, eliminating all the costly overhead Best Buy incurs. Thus, Amazon can get away with selling merchandise at a much cheaper price.
Shipping costs are a HUGE expense to Amazon. Amazon has pushed product manufacturers into using least amount of packaging as possible and has invested hundreds of millions into developing light-weight, sturdy boxes & packing material (often giving it away to product manufacturers as well). Additionally, Amazon has pushed for low-cost services like SurePost and loaned millions to local start-up companies competing with UPS ( using LTL from Amazon to their area).
A huge, valid concern is that Amazon has been flirting with unsustainable ultra-thin margins as a medium to chase competition out of business. Few people purchase things such as televisions without seeing them first. But given Amazon's virtual storefront, how is that achieved? Consumers flock to Best Buy to test products, which is effectively paying for Amazon's cost. Best Buy, Macy's, etc. have all seen record foot traffic through their stores in recent years, but stagnant/declining revenues. That's a valid concern within the industry today.
They are trying to squeeze everyone else out... they're creating a monopoly. They even undercut fairly big online stores like Newegg and Crutchfield now. Heck, they even sell flowers with prime shipping. Kill the competition, raise prices, profit.
Newegg's just as bad as Amazon is selling products below-cost to force out competition. At least Amazon has decent consumer service; my last two Newegg purchases were refurbished products that were DOA. Newegg refused RMA, and the limited warranty did not cover DOA. Newegg refutes all resolutions as "consumer was satisfied with our outcome." Thank God for American Express. Never purchase anything off the Internet without it!!