On Monday, Amazon very quietly made a policy change, pushing the minimum requirement for free standard shipping from $25 to $35. The tweak is likely to cause some shoppers to think twice about placing orders at Amazon. But overall, the move will probably boost Amazon sales.
There was no official Amazon press release announcing the change in the company’s longstanding Super Saver Shipping option, which for more than a decade has allowed shoppers free shipping on most Amazon orders of $25 or more. Nonetheless, in Amazon discussion forums, deal-monitoring blogs, and how-to sites like Lifehacker, word has quickly spread concerning the increase in the minimum order to $35.
Click around enough at Amazon, and you’ll eventually come across a web page explaining the change, which took place on Monday, October 21:
Amazon’s minimum order size for free shipping has changed to $35. This is the first time in more than a decade that Amazon has altered the minimum order for free shipping in the US. During that time, we have expanded free shipping selection by millions of items across all 40 product categories. Look for “FREE Shipping” on product pages to discover eligible items.
It is highly unusual for Amazon to introduce any policy change that might cause shoppers to hold off on closing a deal, but that is exactly what a higher minimum purchase requirement will do. For an increasing number of consumers, free shipping is absolutely essential for them to complete an online purchase. But right below the announcement regarding the change to the minimum purchase requirement, there is a sales pitch that reveals what this is likely really all about:
Millions of Amazon customers have already made the choice of faster shipping by becoming Amazon Prime members. Prime includes unlimited Free Two-Day Shipping, with no minimum order size, on more than 15 million items, as well as unlimited streaming of over 41,000 movies and TV episodes through Prime Instant Video and access to over 350,000 books to borrow through the Kindle Owners’ Lending Library. The service is so popular that more than a year ago we began shipping more items with Prime than with free shipping.
The strategy, then, seems to be that Amazon is willing to sacrifice some small sales—from customers who are too cheap and/or too wary to sign up for Amazon Prime—in order to boost the ranks of Prime members paying $79 annually for “free” two-day shipping, among the other services mentioned above. Previous studies have estimated that Amazon loses $11 per customer because of the shipping costs incurred via Prime, and yet Amazon Prime is incredibly lucrative because once someone is a member, their Amazon purchases tend to shoot through the roof as they try to get their money’s worth with the service’s free shipping. Prime membership doubled in less than two years, and based on the latest tactics and consumer trends in general, some expect it to double again over the next four or five years.
Even as Amazon is seeing more competition in form of ShopRunner challenging Prime with a $79 free two-day shipping service of its own, and retailers like Target, L.L. Bean, and Nordstrom increasingly offering free shipping to all or most customers, Amazon is seeing success in its efforts to convince more consumers that a $79 Prime is more than worth the investment.
The timing of the change to Amazon’s free standard shipping option, combined with a stepped-up push for Prime membership, is significant, as one Amazon forum commenter noted:
This change should push many more customers to sign-up for Prime during the Holidays.
Well played Amazon.