On Amazon it’s possible to get free shipping on millions of eligible items. For many items, if the total price comes out to $25 or more then it’ll be sent to your home for free. If you’re signed up for Amazon Prime, then not only can you get free shipping on all eligible items, but Amazon will deliver the product to you in two days. Jeremy Olshan talked about what an incredible deal this was and what it may be costing Amazon:

• The most expensive thing for Amazon to ship may well be the $3,486 Cannon safe which would normally cost over $700 to ship. Yet shoppers can have Amazon send it to them for nothing.
• Amazon loses money at a rate of more than $2 billion a year because of shipping costs.
• The cost of free shipping reduces Amazon’s profit margin on any product from the 5% that retailers typically earn, to 1%.
• The company made a net loss last quarter and if it weren’t for its shipping offers it would likely have made a substantial profit.
• Amazon, for its part, seems to hope that it will recoup its costs by making customers so loyal to the company that they will buy everything from them.

Read more about the company’s financials, questions that the company won’t answer, and other mysteries about the true cost of goods for Amazon over here.

Source: Market Watch