Amazon Prime Goes Subprime with Add-On Free Shipping Gimmick

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Jeff Bezos  CEO of AmazonOver the weekend Amazon.com (AMZN) announced its latest project to get consumers to dig deeper into their wallets. The new program -- called "Add-on" -- enables the e-tailer to offer free delivery on "thousands of items at a low price point that would be cost-prohibitive to ship on their own."

For years, Amazon has put smiles on shoppers' faces and its own delivery boxes with one simple idea: Spend $25 on its site, and Amazon would ship your order for free (and in many cases, tax-free).

In February 2005, the company went a step further, introducing "Amazon Prime," a service whereby, for a small annual fee, the company would ship almost any item to you -- no matter how small, or how cheap -- for the same $0 delivery cost. Subsequent years featured the introduction of free online video streaming for Prime members (February 2011) and even free Kindle book borrowing as well (in November 2011).

As it turns out, as Amazon was ramping up the benefits of Prime, it was also taking a bath on some items: namely small-ticket items, many costing $5 or less, that cost Amazon more to ship than it cost the customer to buy in the first place. And in recent years, Amazon's been paring back on Prime-enabled free shipping of such items.

Now, with Add-on, Amazon will let you piggyback a low-dollar-value item onto your order, making it easier to reach the $25 minimum that qualifies you for free two-day shipping.

What's It Mean to You?

Of course, all this does raise a question: If Amazon will free-ship items totaling $25 without Prime, then why continue to pay $79 a year if the main draw of a Prime membership is free shipping?

The obvious answer is that with Prime, items ship free in two days. Without it, a $25-plus order ships in three to five days. And of course, there's the Kindle lending, the free video streaming, and whatever new fringe benefits Amazon comes up with in future years. If you don't own a Kindle, though, and don't stream your videos, Amazon's big new idea may not seem to be much of a big deal at all.

The Catch

Let's hope, though, that most consumers don't adopt this point of view. Why? Clearly, Amazon's objective in introducing "Add-on" is to goose its sales figures a bit. Snag a $5 incremental, small-dollar purchase that wasn't available on the site before (except in bulk) and you can boost the revenue from a $20 Prime order by 25%. That's a goal worth reaching for.

But what happens if folks decide Add-on is no big deal? What happens if at the now-highlighted $25 price point, they begin to reconsider whether Amazon Prime is worth shelling out $79 a year for anyway, and Amazon starts losing money to canceled Prime subscriptions? Why in that case, the company just might decide that it needs to make the advantages of Prime a bit more clear-cut -- for example, by upping the threshold for non-Prime free shipping to $30, $35, $50...

A move like that could make Add-on look like a much better bargain than it does right now. But it could cost non-Prime shoppers dearly.

Motley Fool contributor Rich Smith holds no position in any company mentioned. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com.






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Kitty Fister

Sneaky fúckers...

June 24 2013 at 2:00 PM Report abuse rate up rate down Reply
Kitty Fister

Sneaky *******....

June 24 2013 at 5:24 AM Report abuse +1 rate up rate down Reply
Trisha Lynn Dragon

While I am not overjoyed with the add-on program, I could tolerate it. Amazon has had to shift gears a bit with the new tax situation and so forth. I don't like it, but I understood it

The S&S to 5% royally sucks nard. Again, didn't LIKE the change, but understood it and tolerated it.

Moving S&S to ONE ship date per month that can't be changed and making sure that the bulk of the S&S items are add-on if you DON'T S&S . Fork you. Amazon lost my business with this crap. Enough is enough. Turned my auto renew off and seriously doubt I will miss it. Why on earth would I give Amazon an extra $80 for what everybody else gets free?

Fortunately Rakuten (formerly buy.com)has decided to capitalize on Amazon's BS, so I am simply going to them.

The $1000-$1500 a year I spend with Amazon apparently isn't important or needed. Message received. I will spend it with retailers who are interested in my money.

April 25 2013 at 12:04 AM Report abuse rate up rate down Reply
Treason686

I love buying from Amazon, but I've been buying Nature's Way St John's Wort for a while.

Well, I went to purchase another bottle today, and as it turns out, it's now an "Add-on" item. Now I can't order it at all without spending $25, but I don't need anything else.

Well, I ordered it from somewhere else for the $8, with no shipping charge. I'll wait an extra day, but I don't have to spend $25.

January 13 2013 at 8:31 PM Report abuse rate up rate down Reply
Jeff Kay

I just now discovered this new "add on" business when I went to buy some computer paper (which I've purchased on its own many times using my Prime membership). Now suddenly I have to spend $25 in order to purchase it?? Seriously? I don't care if they "lose money" shipping it--isn't that what I paid the $79 membership fee for? I look at that $79 fee as a way to off-set possible shipping losses like this one (btw if you had any idea how little Amazon actually pays to ship items, you'd be appalled). NOT COOL, AMAZON!

November 19 2012 at 6:45 PM Report abuse +1 rate up rate down Reply
Jo Jo, sr

Prime or no prime, Amazon delivers your order when it gets around to it and not a moment before. You can't track it accurately and you don't know when it's shipped. When you get it, you get it. I do not like this practice.

October 24 2012 at 10:04 PM Report abuse rate up rate down Reply
3 replies to Jo Jo, sr's comment
suec8

We buy a lot less from Amazon than we used to. They do not collect sales tax for our state, so we have to save all of our Amazon sales receipts and calculate the sales tax (line 13 of our 2011 state form) and pay an entire year's worth of sales tax all at one time when we file our income tax.
I HATE BEING THE BOOKKEEPING DEPARTMENT FOR A LARGE COMPANY LIKE AMAZON. Why can't they just report it to the states the way Sears, Target, Walmart and other large companies do and save their customers this paperwork headache? They have a physical presence in our state (multiple fulfillment centers).

October 24 2012 at 8:26 PM Report abuse rate up rate down Reply
1 reply to suec8's comment
carelctr284

Amazon does not report the names of customers and what they purchased to the IRS. Get a clue.

October 25 2012 at 4:46 AM Report abuse +1 rate up rate down Reply
1 reply to carelctr284's comment
itacurubi

Wether they send that information to the IRS or not is irrelevant; sales taxes are paid to state and local entities. Nevertheless, I don't believe Amazon sends that information to those state and local authorities. On the other hand, one is still committing a crime, it's just that you're unlikely to be caught. (And, of course, the poster could be a small business who buys a significant dollar amount from Amazon and wishes its books to balance correctly.)

October 25 2012 at 8:07 AM Report abuse -1 rate up rate down
laureenmt

Amazon customers who have paid for Prime membership have been complaining about this Add-On program for weeks now. Many of the Add-On items used to ship for free. Now, even if I order a Prime-eligible item that will ship for free, Amazon will not throw a $2 Add-on item into the same box. In fact, I cannot order the $2 Add-on item from Amazon at all, even if I am willing to pay for shipping, unless my order totals $25. The result is that I am ordering from other merchants more that I used to. Not what Amazon intended.

October 24 2012 at 3:17 PM Report abuse +3 rate up rate down Reply
1 reply to laureenmt's comment
joel949@gmail.com

I signed up for the Prime membership primarily for the "free" shipping, so I wouldn't have to purchase additional items to avoid shipping charges. (I put free in quotes because it's not really free, it's PRE-PAID in the membership fee.)
I agree that many of the items in the add-on program seem to have previously been eligible for Prime shipping.
I think Bezos is being a jerk for reneging on the terms of the Prime membership and I don't think it will induce me to buy more from Amazon, so far it has only made me shop elsewhere. And I certainly won't pay for Prime membership again. I went to the Manage Prime Membership page under my Amazon account settings and SET MY PRIME MEMBERSHIP NOT TO AUTOMATICALLY RENEW. I hope many more people will do the same.

January 09 2013 at 5:59 PM Report abuse rate up rate down Reply
Toni Mansbridge

Interesting Amazon article. Have you heard of the 'social selling' trend?

I found this site and love to sell on it - it's sort of like an 'Ebay/Etsy of Pinterest'. It's called SellPin.

http://www.SellPin.com - no listing fees and your item stays up/pinned on Pinterest until it sells.

October 24 2012 at 3:06 PM Report abuse -1 rate up rate down Reply
raquela2020

My experience with Prime has been great. Always get in 2 days and sometimes over night if I place the order early in the day. I subscribe to cat food, soup, coffee and own a Kindle getting a free book each month too. So well worth the money it's crazy!

October 24 2012 at 2:57 PM Report abuse -2 rate up rate down Reply