Why Amazon's Financial Strategy Is Making Everything Else You Buy More Expensive

While Amazon founder Jeff Bezos stepped down from his original leadership position in the company in 2021, his net worth and the company's stock have continued to rise. This has even been the case as tariffs from President Donald Trump's administration increased prices for Amazon shoppers. The reason the company and, by extension, Bezos have continued to profit is due to its effective implementation of the Amazon Flywheel Model. Because of this system, consumers have become more dependent on Amazon, with Americans actually spending increasingly more on the site each month.

This financial strategy is what Amazon executive Jeff Wilke called a "virtuous cycle ... written on a napkin by Jeff," which he believes will one day be in the Smithsonian Museum. It is this cycle that caused Amazon to build what the Federal Trade Commission (FTC) and activists believe is an exploitive system that manipulates prices on a global scale. Amazon is accused of forcing sellers to change the market price of their goods to benefit the company. 

The company's flywheel is made up of several parts that create a feedback loop. These components are selection, customer experience, traffic, sellers, and low costs, all of which fuels growth. Customers originally came to Amazon for a large selection of books that were easily purchased online. This broad selection and easy user experience led to more buyers and greater incentive for sellers. While the flywheel structure can be leveraged for consumer benefit, lawmakers from 17 states say Amazon's application has created an economic landscape where it directly dictates prices, even beyond its website.

Amazon's system depends on traffic, which is needed to keep the wheel running. If another competitor offers cheaper or better pricing, traffic (and the wheel) may slow down. The company has grown through this system, reinvesting its profits into innovation, including Amazon Web Services, which has now partnered with OpenAI. Of course, the profits also go directly into the pockets of corporate executives, with CEO Andrew Jassy's stock trading plan in 2024 netting him more than one thousand times the median Amazon worker's salary.

Regardless of their innovation, Amazon has several business practices within the flywheel system that have led to increased prices. On the consumer side, the company has been accused of locking shoppers in, which resulted in Amazon's $2.5 billion settlement with the FTC in September 2025 after it was alleged to have tricked users into signing up for Amazon Prime. Prime requires an upfront payment for many users, further incentivizing customers to only use Amazon for their shopping.  Prime is the crux of much of Amazon's customer component, as it sets it apart from the broader online market, with free shipping and discounted product costs, albeit with a hefty upfront cost of $138 a year, double that of a Costco membership. Amazon brings shoppers in with fast delivery but locks shoppers to the flywheel by charging upfront. This is part of what leaves shoppers hostage to Amazon's pricing, but how it treats sellers is how it truly controls the market.

Amazon uses several methods to keep sellers dependent. One technique Amazon has been guilty of is having sellers sign a most-favored-nation agreement, requiring them to keep Amazon's sale price as the lowest in the market. While this was outlawed in litigation, Amazon will penalize sellers by removing their "Buy Now" button if they find a product at a lower price elsewhere in the market. Stacy Mitchell, of the Institute for Local Self-Reliance, said in an interview with More Perfect Union: " Most sellers depend on Amazon for 80%/90% of their sales, they can't risk that, so what they end up doing is inflating their prices across the web."

The online giant has tied sellers into restrictive deals through Amazon's Prime deal offerings. Here, sellers must use Fulfillment by Amazon (FBA), a service that stores and ships sellers' goods, enabling one-day shipping. By doing this, sellers lose autonomy and bear the brunt of Amazon's shipping costs through seller fees, which have gone up 50% since 2016, according to Smarscout. Sellers often offset those costs by raising prices across the market. Sellers have even seen Amazon use FBA data to find manufacturers and cut out sellers by contracting directly with manufacturers to make the same product, a practice known as "Dragon boating."

It is these practices that have led to several FTC antitrust lawsuits, which have yet to be resolved. If found guilty, Amazon will pay a massive fine and be split into smaller holdings.