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Amazon gives non-Prime members free shipping at $35 or more of eligible items. Instead of simply letting users get the product with free shipping, they've added a discount that prices it exactly one cent below the $35 limit, while only subsidizing the price with $3.38, which is about half of what they'll then charge you for shipping.
Both
How? You cannot buy this “cheaper” version without spending more money. It’s 39.99 with free shipping other places. It’s $39.99 on Amazon because you have to pay for shipping. You’re not saving money, you’re just getting more stuff from Amazon.
Unless you buy useless stuff just to avoid shipping, it's still money spent toward something you would have bought later (possibly for a higher price, on retail). It counts on future savings.
If you spend the same amount of money to get more things that you were going to buy, you've saved money.
If I need bread and cheese and one store sells bread for $10 and cheese for $5, and another sells $10 bread half off if I buy $5 cheese with it, I save money going to the second store, even if I only came into the store looking for bread.
Amazon is using dirty tricks to ensure you buy from them even if it's at a lower margin. A smaller profit is better than no sale. It also gets consumers more accustomed to just buying stuff on Amazon, and increases the sales producers see through the Amazon platform. Some producers entirely offload their commerce to Amazon since enough of their sales come from there it makes running their own less viable.