I'm sure they lose money or are right on the edge with some Prime customers. That said: * Large-volume shippers have always gotten much lower prices than you'

I'm sure they lose money or are right on the edge with some Prime customers. That said: * Large-volume shippers have always gotten much lower prices than you'll get walking into a UPS store. Amazon is an uber-volume shipper. * Their warehouse network minimizes the actual distance products must travel on average. * I naïvely assume they've worked with carriers to optimize how they interface with them (both digitally and physically; e.g. boxes stacked/arranged in certain ways for pickup). * Amazon often does not have the lowest prices for things, especially small/cheap items. If you buy a $5 widget you could have gotten for $3 at the local hardware store, some of that is probably making up for cheap shipping.