Despite rising costs and inflation, Amazon’s CEO, Andy Jassy, recently gave some insights into how the company is able to keep its prices so low. Keeping prices competitive is something all ecommerce brands need to prioritize, as pricing properly is crucial for profitability, customer loyalty, and even attracting customers in the first place.
Amazon CEO Speaks About How the Company Keeps Prices Low
Andy Jassy, the CEO of Amazon, recently had a conversation where he spoke about how, despite rising costs across the board, Amazon’s retail prices are actually down compared to last year.
In addition to that, he also went over the things the company does to keep them there. First, he says that the company spends a “disproportionate amount of time” both inventing and trying to figure out ways to lower the company’s cost-to-serve inside its fulfillment network.
Specifically, Jassy mentioned a series of infrastructure investments behind-the-scenes that were designed to make it cheaper to get products to consumers. For example, he said that Amazon “rearchitected our regional network in the U.S.” so that it could store items closer to end users, so they travel shorter distances, which reduces costs and speeds up delivery.
The company also created features like “Add to Order”, which enables customers to add items to an existing order and shipment, which can cut down on both delivery and packaging costs.
He also added that while it’s easy for a company to lower prices, it’s much more difficult to afford to lower prices. This is great advice for all ecommerce brands to keep in mind. Offering lower prices is great and will likely attract more customers, but if you can’t afford to offer the prices you currently charge, your business may struggle to earn a profit, even with plenty of sales.
But while Amazon is focused on keeping the company’s cost-to-serve low, it also isn’t afraid to invest in solutions that improve the delivery experience for customers and sellers, such as scaling up drone delivery in 2026.
Deciding on Proper Pricing
The amount of time and effort that Amazon puts into pricing and optimizing its costs should be a sign to other ecommerce brands to do the same. While Amazon seems to focus primarily on keeping prices low, each company’s goal in terms of pricing is different.
For example, some companies may aim to offer incredibly low pricing to bring in more customers, make more sales, and create brand loyalty, while others may instead choose higher prices to suggest that their product is of higher-quality, more exclusive, or more valuable.
However, instead of just arbitrarily choosing a high or low price for your items, the proper pricing for your business often depends on how your competitors price their products. As a result, perform some competitive analysis frequently to check how companies that sell similar items to you are pricing them.
While you don’t need to decide to price right in line with your competition, their prices are usually a good starting point. Price things too high and customers may not choose you over your competitors without a good reason, but if you undercut them too low, you may not make enough profit to succeed as a business.
Of course, in addition to competitor prices, other factors go into deciding the proper prices for your items, such as market demand/a customer’s willingness to pay, the perceived value of your product, economic trends in your industry, and, of course, your costs.
Keeping Your Costs Low
Speaking of your costs, if you’re planning on offering low and/or competitive prices, you need to do all you can to keep your costs low. For example, it’s nearly impossible to offer prices in line with your competition if your costs are twice as high as theirs.
A great option for ecommerce brands looking to keep costs low is optimizing the supply chain. Companies can do this by using third-party logistics providers to avoid the costs of managing their own warehouse, automating inventory tracking to reduce dead stock, or negotiating with suppliers for better pricing, if possible.
Reducing return rates is also key, as returns have a huge financial impact on ecommerce brands. To minimize returns, make sure you use great photos for your products, create accurate descriptions, and don’t mislead customers about any aspect of anything you sell.
Also, check your software. While businesses often rely on platforms and tools to simplify operations or automate certain tasks, many companies are using far more than they need. If you simply get rid of a few tools you no longer need or use, that can instantly reduce your costs by a sizable amount.
Reducing packaging size and weight, eliminating high-cost marketing that doesn’t deliver results, and automating mundane tasks can also help you to keep your costs manageable, so you can continue to offer low, competitive, and attractive prices to your customers.
