Everything on Amazon costs more because Amazon takes roughly 45 cents of every dollar third-party sellers earn, and its search is built to hide the cheapest listings. Sellers pass those costs straight to you.
There is a good chance a cheaper version of the last thing you bought on Amazon sat in those same search results, and Amazon’s algorithm made sure you never found it. That is just the start of what has been quietly driving up your prices for years.
Tariffs and supply chains explain less of it than you would think. Most of it comes from a system Amazon engineered on purpose, and once you see how it works, you will never look at Amazon search results the same way again.
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Table of Contents
Key takeaways
- Amazon takes about 45 cents of every dollar a US third-party seller earns, through referral fees, fulfillment fees, and advertising.
- Search ranks by ads and sales history. The cheapest listing can be invisible if the seller skipped ads, so Google the exact product name to find it.
- Repricing AI raises prices during traffic spikes, including Prime Day, because conversion is high and the software extracts more per sale.
- Amazon Basics undercuts sellers by ~30% because it skips referral and fulfillment fees, forcing surviving sellers into an ad war that lifts the whole category’s price floor.
- It is often cheaper to buy from the brand’s own website, since the 45% Amazon tax is baked into the marketplace price.
Who sets the prices on Amazon?
The prices you see on Amazon are set by the millions of independent third-party sellers competing on the marketplace, and Amazon makes it more expensive to be one of those sellers every single year. Amazon shapes your prices through the costs it pushes onto them.
Sixty percent of everything sold on Amazon comes from third-party sellers, the majority of the platform.
Amazon also generated $172 billion in third-party seller services revenue in 2025 alone.
That number makes Amazon look more like a landlord than a retailer. It collects rent from millions of small businesses, and the rent keeps going up.
I have been an Amazon seller since 2014, and I understood this fully a few years ago when I went through my own numbers line by line. What I found made me angry.
For some of my products, Amazon’s fees were over 65 percent of my revenue because of the huge increases in recent years.
When fees go up, sellers have exactly two choices: absorb the cost and shrink their margin, or raise the price. Most sellers operating at competitive margins cannot absorb it, so it goes directly into the price tag.
Fee increases also keep coming. They happen on a rolling basis, year after year, across categories.
How Amazon search buries the cheapest listings
Amazon search ranks by sponsored placement, sales velocity, reviews, and conversion history, so the cheapest version of a product can sit on the platform completely invisible. A listing with no ad budget or sales history rarely surfaces, however low its price.
I learned this shopping for a hard drive. Everything in Amazon’s results looked expensive, so I switched to Google, typed in the hard drive I wanted, and found a much lower price that pointed directly to an Amazon listing.
Back on Amazon, I could not find that product through search, even after scrolling through multiple pages. I finally pasted the exact title from Google into Amazon’s search bar letter for letter, and there it was.
That cheaper listing had been on Amazon the whole time, and Amazon’s search kept it out of sight. The system works exactly as designed.
Sellers know how search works, which is why they keep paying for visibility. Amazon generated $68 billion in advertising revenue in 2025, up 21 percent from the year before.
That makes Amazon’s ad business bigger than all of YouTube. The sellers who pay show up first, and the sellers who price too low to fund an ad campaign get buried.
If the cheapest option surfaced at the top, sellers would compete purely on price, margins would collapse, and Amazon would collect less in advertising. The current setup is more profitable for Amazon, and that is the whole point.
To find the cheapest version of something on Amazon, skip the default search. Google the exact product name, click through to the Amazon listing that comes up, and compare it with what Amazon’s own search showed you.
You will often find a meaningful gap between what Amazon’s search displayed and what actually exists on the platform.
How Amazon repricing software raises prices in real time
Prices in many Amazon categories are dynamic, set in real time by repricing software engineered to find the highest price the market will bear. I know this because many colleagues I have met through Sellers Summit and my mastermind groups use repricers.
My friend Chad Rubin created an AI repricer called Profasee. It monitors competitor pricing in real time, and its entire goal is to extract the maximum value from every sale.
When traffic is low, usually overnight or early morning, repricers nudge prices upward to test the market. If competitors’ software follows, the floor for the entire category moves up automatically across thousands of listings at once.
The most counterintuitive version happens during Amazon’s biggest sales events. When Prime Day hits or the holiday rush starts, repricers detect the traffic spike and raise prices, because conversion rates are high and buyers are ready to spend.
You show up on Prime Day expecting a deal after weeks of Amazon calling it the biggest sale of the year. Repricers across the category already saw the traffic coming and moved prices up before you arrived.
Amazon takes part directly. It launched its own repricing tool in 2025, and early adopters reported a 15 percent increase in Buy Box wins.
The prices you see reflect what the algorithm thinks you will pay, adjusted constantly in both directions.
How Amazon Basics clones and undercuts third-party sellers
Amazon Basics works as a price weapon: Amazon clones a seller’s best product, prices it about 30 percent lower, and advertises it right on the seller’s own listing. A friend of mine lived through exactly that with his ice packs.
He sold the gel kind you put in a cooler or use after an injury, and he had built a real business with solid reviews, strong search ranking, and consistent sales. Then Amazon released an Amazon Basics version of his exact product, with the same form factor and packaging design, priced 30 percent below his listing.
It started showing up directly on his product page as an advertised alternative. Amazon was competing against him on his own listing, using ad placements he was paying for.
Amazon Basics can do this because it skips the fees third-party sellers pay, including referral fees, fulfillment fees, and inbound placement fees. Amazon handles fulfillment as a first-party product, so Basics can price 30 percent below a seller and still profit while the seller would be underwater.
My friend had two options: exit the category or outspend the competition in ads to hold his position. He chose to fight, his ad spend went up significantly, and his prices went up with it.
His loyal customers paid more. The shoppers who switched to Amazon Basics were buying from the company that made everything more expensive in the first place.
Amazon profits on both outcomes. It earns directly on Amazon Basics sales, and it collects the ad spend and referral fee when you buy the third-party product at the higher price.
Amazon Basics quietly works as a pricing mechanism across entire categories. It eliminates the cheapest competition, forces every surviving seller to fund an ad war they did not start, and raises the price floor for the whole category.
How Amazon ad costs raise the prices you pay
Amazon ad costs raise prices because every seller has to cover cost per click before setting a price, and those clicks get more expensive every year. My own Amazon ad costs have gone up by double digits every single year, and the broader data tracks.
The average cost per click on Amazon hit $1.12 in 2025, up from $0.97 the year before, a 15.5 percent increase in a single year.
Over 70 percent of Amazon sellers now run paid ads, compared to 40 percent just five years ago. More bidders in an auction push prices up, and Amazon’s ad platform is one of the most competitive auctions on the internet.
When I run an ad, the cost per click is a real line item next to my product cost and my FBA fees. All of those costs get covered before I set the price you see, so when my ad costs jump 15 percent in a year, some of that flows into the product price.
Every seller running ads does the same math, and advertising is only one of the costs. Referral fees, fulfillment fees, the inbound placement fee, and return processing fees each live in a separate report and chip away at the margin at the same time.
That math only moves in one direction.
How much Amazon takes from every dollar sellers earn
Amazon takes approximately 45 cents out of every dollar that third-party sellers earn in the United States, through referral fees, fulfillment fees, and advertising.
Every one of those cents ends up in the price you pay. Amazon works like a toll road far more than a traditional marketplace.
Amazon built this deliberately. It is one of the most analytically sophisticated companies on the planet, and every fee increase, algorithm tweak, and Amazon Basics launch was a deliberate call.
How shoppers can pay less than the Amazon price
Shoppers can often pay less by buying directly from the brand’s own website, because the roughly 45 percent Amazon takes is baked into the marketplace price. On its own site, the brand skips those fees, so it can charge you less and still make more on the sale.
I do this myself now. If I know the brand, I go to its website first, and a lot of the time the price is lower, sometimes with free shipping or a discount code on top.
Amazon stopped being a discount retailer a long time ago. It runs as a monetization engine that sells seller access to you, and every mechanism it built to extract more from sellers ultimately flows out of your wallet.
Why smart sellers use Amazon for cash flow while building their own brand
The sellers I know doing well long term use Amazon for cash flow while they build something Amazon cannot take from them: their own brand, their own customers, and their own website. The margin pressure sellers feel is real, and it will last, because Amazon makes too much money from it.
With their own brand in place, a fee hike or a buried listing still stings, and the business survives it.
Frequently asked questions
Why do products cost more on Amazon than they used to?
Amazon takes roughly 45 cents of every dollar a US third-party seller earns through referral fees, fulfillment fees, and advertising, and those fees rise every year. Sellers who cannot absorb the increases pass them straight into the price, so the cost of being a seller is built into what you pay.
Does Amazon search show the cheapest products first?
Amazon search ranks listings by sponsored placement, sales velocity, reviews, and conversion history, so the cheapest product rarely shows up first. To find it, Google the exact product name and click through to the Amazon listing that appears.
Why are Amazon prices sometimes higher on Prime Day?
Amazon prices can rise on Prime Day because repricing software detects the traffic spike in real time and raises prices while conversion rates are high. A heavily marketed sales event can push prices up across a category before shoppers arrive.
How does Amazon Basics make prices go up?
Amazon Basics pays no referral, fulfillment, or placement fees, so it can undercut third-party sellers by about 30 percent and still profit. That forces surviving sellers to spend more on ads to hold their position, and they raise prices to cover the spend, lifting the whole category’s price floor.
Is it cheaper to buy from a brand’s own website than Amazon?
Buying from a brand’s own website is often cheaper, because the roughly 45 percent in Amazon fees is baked into the listing price on Amazon. On its own site the brand skips those fees, so it can charge less and still make more, frequently with free shipping or a discount code on top.
How can sellers protect their margins from Amazon’s fees?
Sellers protect their margins by using Amazon for cash flow while building their own brand, customer list, and website, which Amazon cannot take away. With those in place, a fee increase or a buried listing stings and the business survives it.
