My online order cost 99p but was sent by letter with first class stamp which costs £1.25. How is that possible?

[fishCellar]

Just that really.
Can businesses buy stamps cheaper?

If it was franked then that is £1.06. Someone has made a mistake I guess.

No, just someone following the process automatically and not thinking it through. I once received a cheque in the post for like 57p. It was an overseas cheque not in £ and sent from the country where it originated, so more than 57p to post to me. It was royalties for something I published a long time ago (I assume that meant someone - one actual person - bought it that year!). The bank said it was a £20 flat fee to deposit a foreign currency cheque. I had to laugh, all that for 57p. 😂I binned it.

Some businesses do it wanting you to buy more, or to build up feedback if they’re starting out. Or it might just be a mistake.

This was an eBay seller with over 800 transactions.
I think it might be so that they get to appear at the top of the list of sellers on eBay when you order by lowest price which a lot of people will do.

China charges businesses there almost nothing to post export goods.

This was a UK seller and it was delivered 6 days after the order.
I guess it's possible they would normally use a second class stamp (75p) but may have had a Xmas rush and fallen behind with fulfilling orders, so decided to use a first class stamp to try and avoid negative feedback.

Costco are selling 8 books of 8 first class stamps for £76.99, so £1.21 per stamp, rather than £1.25, but that's not much of a saving, and still more expensive than what you bought.

I suspect they've not listed it properly and should have charged more postage, or had a higher starting price. Either that or they just take a chance that the final selling price is enough to cover it and they're happy to risk it.

I bought something for £1 on eBay recently and had to pay 75p postage on top, which is the correct price for a regular letter. It then transpired it was a large letter, so £1.55. The seller will have literally made 20p on my sale, probably in to a loss if they had to use their car to get to the post office to post it!

The ad on eBay didn't specify whether it was first or second class, it just said free postage.
I would have been happy with second class as it wasn't urgent.

OP would you buy from the seller again?

If so then spending £1.25 on sending something worth 99p to you is a win for them.

I guess it's just a loss leader to help with their eBay account, good reviews etc

I would but what I purchased was a slider to be able to block the camera on my laptop so I won't need another for a few years and when that happens I will probably just search again for the cheapest.