The Real Reason Everything On Amazon Costs So Much More Now

Added: 2026-05-12

[00:00:00]So, the last thing you bought on Amazon, there is a good chance a cheaper version of that exact product exists somewhere in those same search results. And Amazon's algorithm made sure you never found it. And that is just the start of what's been quietly driving up your prices for years. Because the real reason everything on Amazon costs more than it used to has less to do with tariffs or supply chains. It is something that Amazon has been engineering on purpose for a long time.

[00:00:26]And once you understand how the system actually works, you'll never look at the Amazon search results the same way ever again. Now, here's something most people get completely wrong about Amazon. When prices are high on the platform, people blame Amazon. And Amazon is definitely part of the story, but the entity actually setting your prices is not Amazon itself. It's the millions of independent sellers competing on that marketplace. And Amazon has been making it significantly more expensive to be a seller every single year.

[00:00:56]60% of everything sold on Amazon comes from thirdparty sellers and that is the majority of the platform. Amazon generated 172 billion in thirdparty seller services revenue in 2025 alone.

[00:01:09]Think about what that number actually means. Amazon is not really a retailer.

[00:01:14]They are a landlord collecting rent from millions of small businesses and the rent keeps going up. Now, I've been an Amazon seller since 2014, and I started to understand this fully a couple years ago when I sat down and went through my own Amazon numbers line by line. And what I found pissed me off. For some of my products, the fees Amazon charged me were over 65% of my revenues because of the huge increases in the last couple years. Now, when fees go up, sellers have exactly two choices. Absorb the cost and shrink their margin or raise the price. And most sellers operating at competitive margins cannot absorb it. So it goes directly into the price tag every single time. Also, fee increases on Amazon are not a one-time event. They happen on a rolling basis year after year across categories. But fees are only part of the story because the way Amazon has structured its search results means you're probably paying more than you need to and you probably didn't even realize it. So a while back I was shopping for a hard drive. I went to Amazon, scrolled through the results, and thought, "Wow, these are all really expensive." Nothing was jumping out as a deal. So, I switched over to Google, typed in the hard drive I was looking for, and a result came up at a significantly lower price. I clicked through, and it pointed directly at an Amazon listing. What's going on here?

[00:02:35]So, I went back to Amazon and tried to find that same product using Amazon search, but I couldn't find it. I scrolled through multiple pages of results, and it never appeared. So, I finally copied the exact title from the Google result, letter for letter, pasted it into Amazon's search bar, and there it was. That cheaper listing had been sitting on Amazon the entire time, but Amazon search just made sure I didn't find it. Now, this isn't a glitch.

[00:03:00]Amazon search algorithm does not rank by price. It ranks by a combination of sponsor placement, sales velocity, reviews, and conversion history. The cheapest product in a category can be completely invisible in search if the seller hasn't paid for advertising or doesn't have the sales history to rank organically. And sellers know it, which is why they keep paying. Amazon generated $68 billion in advertising revenue in 2025, up 21% from the year before. And to put this in perspective, Amazon's ad business is bigger than all of YouTube. Now, that number is so high because sellers are paying Amazon for visibility. The sellers who pay show up first. The sellers who price their product too low to fund an ad campaign get buried. So, by design, the cheapest option rarely services at the top of your results. If you want to find the cheapest version of something on Amazon, skip the default search entirely. Google the exact product name and when an Amazon listing comes up in those results, click through. And then compare it to the exact same product when you search for it directly on Amazon. you'll often find a meaningful price gap between what Amazon search showed you and what actually exists on the platform. Now, the reason Amazon built it this way isn't mysterious. If cheaper products surfaced at the top of every search, sellers would compete purely on price, margins would collapse, and Amazon would collect less in ad revenue.

[00:04:23]The current setup is more profitable for Amazon, and that's the whole point. If you want to learn how to sell online profitably without dealing with this Amazon BS, make sure you sign up for my free 6-day e-commerce miniourse below, 100% free, and I guarantee you'll learn a lot. Now, here's something that might make you really mad as an Amazon shopper. The prices you see in a lot of categories are dynamic and are not the result of sellers competing to offer you the best deal. They're the result of software specifically engineered to find the highest price the market will bear.

[00:04:54]And I know this because I got a lot of colleagues in the Amazon space, people I've met through the seller summit and my various mastermind groups who use repricing software. And one of my friends, Chad Rubin, actually created an AI repricer called Prophecy. His software monitors competitor pricing in real time. And the entire goal is to extract the maximum value from every sale. When traffic on Amazon is low, usually overnight or early morning, repricers nudge prices upwards to test the market. If competitor software follows and raises prices too, the floor for that entire category moves up automatically. The AI handled it across thousands of listings simultaneously.

[00:05:34]But the most counterintuitive version of this happens on the days Amazon markets as its biggest sales events. When Prime Day hits or the holiday rush starts, repricers detect the traffic spike in real time and raise prices automatically. And the logic is simple here. Conversion rates are high, buyers are ready to spend, and the software extracts more per sale when it can. So, you show up on Prime Day expecting a deal because Amazon spent weeks telling you it was the biggest sale of the year.

[00:06:02]Repricers across the category already saw the traffic coming and moved prices up before you got there. Amazon launched its own repricing tool in 2025, and early adopters reported a 15% increase in buy box wins. So, Amazon isn't just an innocent bystander here. They're an active participant. And what that means for you as a buyer is that the prices you see on Amazon are a real time reflection of what the algorithm thinks you'll pay adjusted constantly in both directions. But of all the forces driving up prices on Amazon, the one that pisses me off the most as a seller is something Amazon did deliberately to its own sellers in broad daylight. Now, a friend of mine used to sell ice packs on Amazon. gel packs, the kind you put in a cooler or use after an injury. He had built a real business around it with solid reviews, strong search rankings, and consistent sales. And then Amazon released an Amazon basics version of his exact product with the same four factor, same packaging design priced 30% below his listing. And it started showing up directly on his product page as an advertised alternative. Now, that last detail is what pisses me off. Amazon was competing against him on his own listing using ad placements he was paying for.

[00:07:18]And here's why Amazon Basics can do this so effectively. Amazon Basics products don't have to pay the same fees that third party sellers do. There's no referral fees, no fulfillment fees, no inbound placement fees, nothing.

[00:07:31]Fulfillment also works differently because Amazon is handling it as a firstparty product. So, Amazon Basics can price 30% below a third party seller and still make a profit while that same third party seller at a comparable price would be underwater. So, my friend had two options. Exit the category or outspend the competition in ads to hold his position. And he chose to fight, which meant his ad spend went up significantly. And to cover that spend, his prices went up with it. The customers who were loyal to his brand paid more. And the ones who switched to Amazon Basics were buying from the company that made everything more expensive. Amazon profits on both outcomes. If you buy the Amazon Basics product, Amazon profits directly. If you buy the third party product at the higher price, Amazon collects the advertising spend and the referral fee.

[00:08:20]There's no version of this where Amazon loses. And this is how Amazon Basics quietly functions as a pricing mechanism across entire categories. It eliminates the cheapest competition, forces every surviving seller to fund an ad war they didn't start, and the price floor for the entire category rises. Amazon's own moves pushed it there. And when you add up the full cost of it, it is big-time inflation. Now, let me talk about advertising because this is where the inflation really compounds. My own ad costs on Amazon have gone up in the double digits every single year. And based on the broader industry data that tracks, the average cost per click on Amazon hit a buck 12 in 2025, up from 97 cents the year before. That is a 15.5% increase in a single year. And over 70% of Amazon sellers are now running paid ads compared to just 40% just 5 years ago. When more biders enter an auction, prices go up. That's basic economics.

[00:09:16]And Amazon's ad platform is one of the most competitive auctions on the internet. Here's what that cost increase means for you as a buyer. When I run an ad on Amazon, I pay per click. That cost is a real line item in my business sitting right next to my product cost and my FBA fees. And before I set the price you see on that listing, all those costs have to be covered first. So, when my ad costs jump 15% a year, some of that increase flows into the product price. Every seller running ads is doing the exact same math. And it compounds because it's not just advertising.

[00:09:50]Referral fees, fulfillment fees, the inbound placement fees, return processing fees. Each one lives in a separate report and they all chip away at the margin from different directions all at the same time. And the math only moves in one direction. Now, here's the number I want you to sit with. Amazon takes approximately 45 cents out of every dollar that third party sellers earn in the US through referral fees, fulfillment fees, and advertising. That is not what I considered a marketplace in the traditional sense. It's a toll road and every toll ends up in the prices that you pay. And look, Amazon didn't accidentally create this. This is one of the most analytically sophisticated companies on the planet.

[00:10:29]Every fee increase, every algorithm tweak, every Amazon basics launch is a deliberate call. But I bet here's something you probably never thought about. Because of all those fees, it is often cheaper to just buy directly from a brand's own website. Think about it.

[00:10:44]When a brand sells on Amazon, that 45% gets baked into the listing price. When that same brand sells on their own site, those fees don't exist, so they can charge you less and still make more money on the sale. I do this myself.

[00:10:58]Now, if I know the brand, I go to their website first. A lot of the time, the price is lower. Sometimes they throw in free shipping or a discount code on top of it, and you cut Amazon out of the transaction entirely. So, here's the bottom line. Amazon is not a discount retailer. It stopped being one a long time ago. It's a monetization engine.

[00:11:18]And what's being monetized is seller access to you. Every mechanism Amazon has built to extract more from sellers ultimately flows away from your wallet.

[00:11:28]Now, if you're a seller watching this, the margin pressure you're feeling is real and it's not going away. Amazon is not fixing this. They're just making too much money from it. The sellers I know who are doing well longterm, they stop treating Amazon like it's their whole business. They use Amazon for cash flow while they build something Amazon can't take away from them. Their own brand, their own customers, and their own website. That way, when Amazon jacks up fees or buries their listing, it stings, but it doesn't sink them. That's what my next video is about. How to actually build that brand so you're not one algorithm change away from losing everything. It's right here.