This week, just a month before Black Friday, Amazon bumped up the minimum order amount for its free shipping policy from $25 to $35 per order. This is the first time the largest online retailer has changed this policy in 10 years, leaving some business experts puzzled as to why they’re doing it now with the holiday season right around the corner. No official reason has been given as to why the policy changed, although Amazon did announce it would occur earlier this year. Take a look at what experts are saying and how this change may impact holiday shopping for the average consumer.
Competitors and new programs
It’s possible that Amazon may be encouraging its basic customers to join Amazon Prime members, which includes free two-day shipping with no minimum order amount, without restrictions and with free access to their huge store of digital books, movies and TV shows. For $79 per year, customers can become Amazon Prime members and share that membership with four people, which is $15.80 per individual. Another possibility is that Amazon is responding to Walmart‘s recent announcement of their minimum free-shipping policy of $50 per order, the same as Target. Best Buy and Barnes & Noble offer free-shipping on minimum orders of $25.
Additionally, shipping rates are on the increase even more so around the holidays. Any offer of free shipping must be absorbed by the company, impacting their bottom line. Considering Amazon deals exclusively with online orders, spending $1.8 billion dollars in shipping alone in the last 3 months of 2012, the increased rate makes sense. With this much growth, the price of the membership is expected to decrease, ultimately benefiting its customers and building a strong brand loyalty.
One analyst, Paul Santos, suspects the shipping change may be a reflection of “some seriously ugly numbers,” referring to the net losses from Amazon’s 2012 fiscal year sales. Other analysts say it may be a good move since the company is putting a lot of money toward digital products and upgrading its distribution centers. Amazon may be looking at the change as an adjustment geared toward its long-term growth that will pay off as they continue to build up their Prime membership numbers, which have increased from 7 million at the start of 2012 to 10 million by the end of the same year.
Impact on consumers
So how does this impact the average consumer? Certainly those who are shopping online for last minute purchases may have to pay higher shipping charges. It could understandably make some shoppers think twice about making smaller purchases from Amazon, but whether that will result in fewer transactions or larger orders (as shoppers add extra items to meet the minimum) remains to be seen. Restricting the majority of your purchases to just a few retailers – spending higher amounts at fewer places and therefore more likely meeting free shipping minimums – can help you get the most out of your holiday shopping. It’s also worthwhile to stay caught up on the latest holiday deals by frequently checking the Facebook and Twitter pages of your favorite retailers. Keep in mind that many smaller brick-n-mortar retailers may offer good deals to stay competitive with the online markets, so if you’re feeling let down by higher minimum free shipping amounts, it may be time to give your local businesses another chance.
Amazon photo courtesy of Flickr.