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Amazon increases threshold to ship free

Amazon increases threshold to ship free

By David Streitfeld, The New York Times | Updated: 23 October 2013 12:48 IST

In a highly unusual move for the world's most successful e-commerce company, Amazon.com made things a tiny bit harder for some of its customers Tuesday.

Considered by itself, the change is very small: Amazon tightened the requirements for one of its most popular shipping methods. Customers who want their items sent free will now have to buy at least $35 worth of goods, up from $25.

Symbolically, however, the change is much more significant. It comes in the middle of a debate over when, if ever, Amazon will begin earning money relative to its $75 billion in revenue this year. On Thursday, when Amazon reports its third-quarter earnings, analysts expect a loss.

Amazon became so large by selling many things cheaply and mailing them cheaply. Free shipping was important enough to that process to be mentioned in the company's financial filings: "We believe that offering low prices to our customers is fundamental to our future success, and one way we offer lower prices is through shipping offers."

The $25 threshold for what the company called Super Saver Shipping was in place for more than a decade. Amazon gave no reason for the change, and a spokesman declined to elaborate.

Super Saver Shipping was in many ways the company's best deal for people who were occasional-to-regular shoppers but did not need emergency orders of diapers. Why buy something for $20 and pay a few dollars shipping if you could buy two things and get them mailed free? The only problem: Orders could take as long as a week.

Amazon has focused on converting customers to Prime shipping, which costs $79 a year for unlimited two-day delivery and other benefits. Last year, Amazon announced it shipped more goods with Prime than with Super Saver.

Gene Munster, an analyst with Piper Jaffray, hailed the threshold increase as a smart move by Amazon, saying it would push more people to Prime. Since the 12 million Prime members are the most devoted Amazon customers, Munster wrote in a research note, Amazon would inevitably benefit.

Munster added, however, that the short-term impact on sales was blurrier. Amazon has been increasing its shipping charges in small ways in the last year. This is by far the biggest rollback of benefits for customers at least since the dot-com crash, and will be noticed by them.

"I would often order two CDs to get the free shipping, but now that isn't going to happen," said Ariel Grostern of Washington.

Investors, whose faith in Amazon has been richly rewarded recently, were unfazed. The stock rose 1.9 percent, or $6, to $333.

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