So, Mixers provide service of shuffling bitcoins or provide addresses loaded with bitcoins along with private keys. In short, they provide service so to create anonymity between sender's and receiver's address so that no one can trace the transaction.
My question is why not use Exchanges? When we deposit funds on exchange, bitcoins get deposited on exchange's cold wallet. But when we withdraw funds, withdraw gets processed from exchange's hot wallet. So in short, it is very easy to do anonymous transfer by depositing funds on exchange and withdrawing to other addresses. Why to pay 1-3% fees on Mixers when it could be done for much less on Exchanges. Exchanges like Binance charge just 0.0005 BTC to process withdrawals.
You can't use an exchange as a mixer because of the limits set by the exchange. If you will want to increase your limit or remove your limit you will have to verify yourself. This means that you will have to provide identification documents to the exchange. So you can eventually be tracked anyways. As far as I know, in a mixer you don't have to provide kyc stuffs and you also don't have any limits.
mixer provides anonymity to its users by spending a small percentage from your transaction, without having a limit you remain anonymous. while in an exchanger, you can generate new address but I know it has a limit, unless you do KYC like what you have mentioned. they prefer to use mixer due to its use of service.