News Feature | October 23, 2013

Is Amazon Killing Free Shipping?

By Bob Johns

Amazon.com

The online giant upped the requirements for free shipping by 40%

Amazon.com recently upped the requirements to qualify for free shipping from $25 to $35, a 40 percent increase. This marks the first time in 10 years that the company has done so, and comes at a time when retailers with an online presence are testing everything from in-store pickup to same-day delivery. The odd thing about the announcement is timing it right before the holiday season. This may be by design as the company pushes consumers to increase basket size or switch to Amazon Prime, which offers free 2-day shipping as part of a subscription service. By pushing the minimums higher, the company is effectively killing free shipping on many purchases.

Most of the time you hear retailers announcing expanded free or reduced shipping programs, especially around the holidays. This a departure from that norm, but it is not unheard of. Walmart announced a similar move several weeks ago, moving their minimum purchase amount from $45 to $50 to qualify for free shipping. With retailers struggling to preserve margins, you have to wonder if this is a place they have found to be able to either recover margin or offset costs. The concern has to be cart abandonment when customers do not reach the new free shipping thresholds, though.

Free Shipping — A Differentiator For The Holidays

PayPal recently entered the free shipping arena by partnering with several retailers, including Sports Authority and Aeropostale. Customers who purchase items from these retailers qualify for free 2-day shipping if they check out using PayPal, with no minimum purchase required. Although it is unknown how long this program will last, it is listed as a “limited time offer,” I would assume it will at least continue through the busy holiday season.

Shop.org’s eHoliday survey recently showed that 27.3 percent of online retailers plan to add free shipping earlier this year due to the economy. They are looking at it as a differentiator for customers who are stretching their budgets for the holidays. A full 34.9 percent of online retailers already offer free shipping year-round. In fact, Neiman Marcus recently announced free shipping all of the time, and is including free return shipping.

Last year, many retailers started their free shipping programs close to Black Friday, but with both Amazon and Walmart raising minimums, you have to wonder if other retailers will see this as an opportunity to increase their minimum requirements or as an opportunity to steal customers form these two giants.


Check out our E-Commerce Report to see how shipping is affecting online sales.


 

Newsletter Signup
Get the latest retail industry news, insights, and analysis delivered to your inbox.