If there’s one thing for sure, Amazon knows what it’s doing providing Prime members free two-day shipping. Since shoppers feel they have a level of peace of mind with using Amazon throughout the year, it’s a deal that appears to be well worth it. With its’ latest move, Amazon now has decided to, at the least, test the waters to see if non-Prime members will come on board, expanding its’ already dominating market share online.
The Wall Street Journal recently reported that Amazon has announced that it is raising its’ minimum online order amounts for non-Prime members from $35 to $49 to qualify for free shipping. The new threshold is said to be an incentive for regular customers to become Prime members. For $99 annually, Prime members get to receive free unlimited two-day shipping, in addition to streaming movie and music service. For roughly a decade, Amazon’s minimum order threshold was $25 until 2013, which the retailer took the amount up to $35.
Amazon has reasons to make Prime bigger. The article mentioned how the retail leader’s annual Prime fee can account for between $4 billion and almost $6 billion in revenue per year, based on estimates in the range of 40 million to 60 million members. Also, Prime customers spend about double what non-members do over the course of the year, so it makes sense why Amazon is analyzing what can get border line non-members to switch to Prime.
The increase in the minimum amount also has to do with Amazon’s pursuit to contain its’ shipping costs. The article stated that shipping expenses went up by 37%, equating to $4.17 billion in the last quarter of 2015. This meant as a percentage of sales, its’ shipping costs increased 12.5%, up from 10.9% in 2014. In response to order amount increase, Amazon only stated that “from time to time, we review our shipping options.” With it still being early in the year, the retailer could be attempting to recoup for from the higher shipping expenses. It also could be preparing to make sure it doesn’t have the same shipping cost results this year. The more that customers order, the more revenue is generated to offset shipping costs.
With online shopping is expected to reach to $500 billion by 2018, Amazon knows the time is now to continue its’ momentum as the leading US e-retailer.
The competition is already locked in with the same $49 minimum, even higher. Wal-Mart’s minimum is $50, Jet.com is at $35 and Target offers a minimum of $25. Amazon’s shift to a higher minimum will get the attention of other retailers and they will shift their shipping options, if they deem it necessary to gain market share. Some retailers have turned to Same-Day Delivery to attract shoppers as well.
A number of retailers and businesses have partnered with 1-800 Courier is a New Jersey Courier on the service aspect of fulfilling orders once their purchased online. The Same-Day Courier utilizes the latest in courier technology to assist companies in maximizing their e-retail operations and devise shipping strategies to compete with Amazon, Macy’s and more.
Reference: 2.22.16, www.wsj.com, Greg Bensinger, Amazon Boosts Free-Shipping Minimum to $49, Elevating Prime Service
