Economies of Density in E-Commerce: A Study of Amazon's Fulfillment Center Network

We find that Amazon saves between $0.17 and $0.47 for every 100-mile reduction in the distance of shipping goods worth $30. In the context of its distribution network expansion, this estimate implies that Amazon has reduced its total shipping cost by over 50% and increased its profit margin by between 5% and 14% since 2006. Separately, we demonstrate that prices on Amazon have fallen by approximately 40% over the same period, suggesting that a significant share of the cost savings have been passed on to consumers.