Amazon.com Inc. has adjusted how much consumers must spend to qualify for free shipping, creating a two-tiered system with different thresholds based on what they’re buying.
Consumers buying anything but books will now have to spend $49 before their Amazon order qualifies for free shipping. But Amazon has dropped the minimum purchase threshold for consumers buying books to $25. Orders that contain goods from multiple categories but include at least $25 in books also will qualify for free shipping, regardless of the total purchase price, Amazon says.
Since October 2013 the minimum was $35 for goods coming from any product category. Prior to 2013, the minimum to qualify for free shipping for any products was $25.
An Amazon spokeswoman says the e-retailer periodically reviews its shipping options.
The majority of e-retailers offer free shipping with or without a minimum purchase price threshold, according to Top500Guide.com data. 635 of the North American e-retailers ranked in the Top 500 Guide and Second 500 Guide offered free shipping of at least some orders in 2014. That number increased during the 2015 holiday season, with 671 offering free shipping in December. A little more than half of those required a consumers spend a minimum amount before they were eligible for free shipping. Of those 352 retailers that required a minimum, the most common minimum was $50.
The increase to $49 for non-book orders could bolster the appeal of Amazon Prime, the program that gives shoppers who pay a $99 annual fee free 2-day shipping and a host of other perks, notably video streaming. While Amazon does not disclose how many consumers subscribe to Prime, securities research firm Consumer Intelligence Research Partners LLC estimated last month that 54 million U.S. consumers are Prime members. And they’re valuable for Amazon: CIRP says the average Prime member spent $1,100 on Amazon.com last year, versus $600 for Amazon shoppers who do not belong to Prime.
The shipping rate change is a clear push to boost the number of Prime customers, says Tom Caporaso, CEO of Clarus Commerce, which owns FreeShipping.com. “In many ways this shows the ‘Power of Prime’ and the huge spending habits (2X non-prime members) that Prime shoppers have,” he says.
And it’s likely to work, he says. “I don’t believe it will turn off customers, but it will nudge them into looking at the math and weighing $50 threshold shipping vs. a $99 Prime membership and all that comes with that service. The additional $15 per package will help offset some of Amazon’s shipping costs which hit a new high of $4.17 billion in Q4 2015,” Caporaso says.
Whether other e-retailers follow suit or lower shipping prices to differentiate from Amazon remains to be seen, but most retailers have aimed to lower their threshold to get closer to no-strings-attached free shipping, Caporaso says. Amazon’s changes may alleviate a bit of that “race to the bottom,” but other retailers need to be mindful of the spending power of Prime shoppers on Amazon vs. other sites, he says.
Amazon is the No. 1 retailer in the Top 500 Guide. To see other Top 500 retailers’ minimum thresholds, click here.