About a year after raising its free shipping minimum for non-Prime customers to $50, Amazon has dropped it back down to $35, according to its website.
Once again, $35 worth of eligible goods or $25 worth of books will garner free shipping. Prime members, who pay $99 per year for a host of perks, enjoy free two-day shipping on many items regardless of order size.
The move could be in response to a challenge from Wal-Mart, which recently eliminated its “Shipping Pass” membership (free two-day shipping on many items but no other benefits) to open up free two-day shipping to all customers purchasing orders over $35, shipping to stores for free on eligible orders.
Wal-Mart’s so-called Shipping Pass wasn’t ever much of a challenge to Amazon Prime. Amazon’s members enjoy a host of perks beyond free two-day shipping, which Wal-Mart’s service never offered, including video streaming, music streaming, free photo storage and extra rewards for those that have Amazon’s credit card.
While Wal-Mart e-commerce chief Marc Lore last month seemed to describe the move as a challenge to Amazon Prime, it’s more of a challenge to Amazon’s non-prime membership, which are less sticky because they haven’t ponied up any membership dues. That not only gives them more freedom to shop around, but also suggests they may have more interest in saving money than enjoying Amazon Prime’s bonus advantages. Keith Anderson, Profitero VP of strategy and insights, compares that to cable television customers who'd rather pay à la carte, rather than for a slew of channels they'll never watch.
Amazon has complicated the disruption by Wal-Mart (or any competition) by quietly lowering its own free shipping minimum for non-Prime members. That could challenge its position somewhat, by increasing its fulfillment costs (a headache for the e-commerce giant) and diluting the value of a Prime membership, though free shipping for non-Prime members remains, notably, slower ground shipping. “With an average 42% of online orders shipping free last year, retailers have no choice but to keep a close eye on their customers’ expectations to receive purchases without additional fees. Keep in mind that Amazon has reduced the free shipping threshold to $35, but is not promising expedited delivery," Sarah Engel, SVP of global marketing at merchandising analytics firm DynamicAction, told Retail Dive in an email. "So, although non-Prime members can now avoid shipping fees, they will still have to wait for up to a week for their packages to arrive."
The game that Amazon itself started (free, fast delivery) is now beginning to be competitively played, by no less than the world's biggest retailer. But Amazon will no doubt be keeping a close eye on how to maximize its benefits to its Prime customers, according to Engel. Lowering its free shipping threshold while reserving two-day for Prime is a "calculated move," and an appreciation of the fact that consumers actually prize "free" over "fast" when it comes to delivery, she added.
"The fact that Amazon released this free shipping threshold reduction with no fanfare displays the pressure the vast majority of retailers have felt from Amazon over the past few years is beginning to go both ways," she said. "The fact that Amazon didn’t outright match Wal-mart’s free shipping timeline shows their continued commitment to the recurring revenue Prime model. ...Closing the gap between Prime members’ benefits and non-Prime members is something that Amazon will be using their advanced data capabilities to monitor closely, and I expect we’ll see additional Prime benefits in the form of exclusive products and discounts as Prime Day approaches.”
Last month, Lore maintained that free two-day shipping is “table stakes” for retailers. But Amazon has now anted up only with "free shipping," leaving "two-day" off the table. While that plays out, consumers will win, and other retailers may get squeezed, says Tushar Patel, Chief Marketing Officer at omnichannel solutions firm Kibo.
"[W]hile lower shipping requirements may benefit the customer, this practice often leaves retailers who do not have the logistical resources to match their competitor’s offerings with low or no margin," Patel told Retail Dive in an email. "Retailers can remain competitive ... by utilizing alternative features such as ship-from-store and in-store pickup.”