5 Reasons Why $35 Is the New $25 at Amazon
Oct 23rd 2013 11:54AM
Updated Oct 23rd 2013 11:56AM
You'll have to dig a little deeper to have Amazon.com foot the bill for delivery of your next order. For the first time in more than a decade, the leading online retailer is boosting the minimum order requirement for its Free Super Saver Shipping option. Instead of spending $25 to qualify for free delivery on millions of items across dozens of categories, shoppers will now need to run up their tabs to $35 to qualify for the perk of free shipping that takes between three to five business days.
It may seem to be cruel timing on Amazon's behalf, changing its stance just a month before the start of the telltale holiday shopping season. But Amazon has its reasons. Let's go over a few of them.
1. Shipping costs have moved higher over the past decade.
From freight to simple postage, it costs more to move a product from place to place now than it did 10 years ago. That would be reason alone to push through an increase, but there's naturally more to this than that.
2. Raising the minimum lifts sales.
If you have a CD and a book in your virtual shopping cart for $26, there's going to be an incentive to also tack on that $10 HDMI cable that you were going to get locally.
Pushing this through ahead of next month's holiday shopping season also makes sense in that regard. Santa's cool with slow deliveries this time of year. No one needs to pay up for overnight delivery in November or early December. If Free Super Saver Shipping is going to get slammed with business in a few weeks, you may as well make it count if you're Amazon and stuff as much as you can into a single order.
3. Amazon Prime is the e-tailer's "prime" objective.
At the end of the day, isn't this really about getting more consumers to join the millions that have already joined Amazon Prime to get free two-day shipping and subsidized overnight deliveries for just $79 a year?
Making the free non-Prime option slightly harder to achieve seems like a no-brainer driver to get folks to sign up for Prime. Once they do, they're Amazon's forever. Just ask anyone who's on Prime. It does alter your mind-set when you need to buy something to know that Amazon's reliable, inexpensive, and will have Amazon-warehoused goods to you within two days.
4. Boosting Amazon Prime memberships helps it compete with Netflix.
Amazon would love to be Netflix in streaming video, but it will have to settle for distant second place.
But it knows that the more people it signs up for Prime, the more who are likely to kick the tires of its rival service, through which it offers select TV shows and movies at no additional cost.
If you don't think that this is at least part of the motive, go ahead and reread Amazon's brief explanation. The company is pushing Prime in the second paragraph, highlighting the 41,000 titles that are available through Prime Instant Video. Netflix isn't going to lose any sleep over this, but it's clear that the bigger Amazon's Instant Video audience is, the more it can justify spending on licensing more content.
5. Amazon is doing this because it can.
If Amazon were sensing a rival breathing down its neck it would probably think twice about this move, but there's no one that's even close. Amazon's also padding its lead. Analysts see the top dog in e-tail boosting its sales 22% this holiday quarter.
How many retailers do you know closing in on $26 billion in sales this quarter are growing anywhere near Amazon's pace? Amazon's alone, and even several retailers bonding together to create a Prime clone in ShopRunner can't seem to keep up.
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The article 5 Reasons Why $35 Is the New $25 at Amazon originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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