How Amazon Makes Money
You might think that Amazon makes money by charging for Amazon Prime. This is closer to the truth, but still wrong.
In fact, it's likely that the ENTIRE retail operation of Amazon loses money.
So how do they make money? It's quite simple: bandwidth and data storage. Amazon charges its customers (like JetPunk) $90 per terabyte of data transferred. Other providers charge as little as $5 per terabyte. Some say that Amazon is marking up their bandwidth by 10,000%.
Data storage is a similar story. They charge $80 per terabyte per month. That's more than it would cost to buy a 1 terabyte hard drive outright. Again, there is a good chance they are marking up the price by 10,000%.
For this reason, Amazon Web Services (AWS) is the money maker for Amazon. The retail arm is most likely a loss leader.
So next time you get a package delivered next day for free and pay less than it would cost at the store, thank a hardworking website owner!
But we do a LOT behind the scenes to save bandwidth so fortunately our bill is probably only 1/10th what it would be if we hadn't taken action.
Thank you, hard-working website owner.
Why use Amazon if they are so much more expensive than other web service providers?
How does the retail section work as a loss leader - I mean does it encourage people to use Amazon’s web services?
Is this message costing you more money the longer it is?!
How does retail work as a loss leader? At some point, Amazon thought that retail was a good business and invested lots of money into it. Of course, it's not a good business. My opinion is that they operate retail mostly for legacy reasons. If they stopped tomorrow, they'd have to take a > $200 billion writedown on all their previous investments. But I doubt they will continue to expand.
And yes, your message is costing us money. Fortunately, not much :)
I think that makes sense!