The profits from shipping are an accounting construct which is essentially a tax on items sold. They assume it will cost X dollars to ship an item, so they book

The profits from shipping are an accounting construct which is essentially a tax on items sold. They assume it will cost X dollars to ship an item, so they book X+margin (possibly 0 margin, depends on how they structure) at sale to shipping costs. If it costs more than X+margin to ship, they lose money shipping even if they net a profit. I said this elsewhere, but the purpose of this construct is to allow Amazon to keep track of actual vs estimated cost of shipping. The purpose of reporting it is to tell analysts whether shipping is a boost to, or a drag on, profits. In your scenario, smart companies say "how can we improve shipping to get that dollar back".