Amazon upped the threshold for free shipping for those who are not Prime subscribers to $49 per order, a $14 hike.The move comes in the midst of shipping cost increases for the tech giant, but experts say it’s more about encouraging shoppers to sign up for Prime.
As Amazon.com seeks to expand its army of loyal customers, the price of not being an Amazon Prime member has just grown significantly higher — at least for those who don’t buy a lot of books printed on dead trees.
The Seattle technology and retail giant upped the threshold to $49 for no-charge shipping for those not Amazon Prime subscribers. That represents a $14 increase from the previous $35. The change is already in effect.
Those who read a lot may save some money, however, as orders containing at least $25 worth of books will be delivered with no shipping charges. Audio books on CD are eligible too.
The move comes as Amazon sees steep increases in the cost of delivering merchandise to customers. In 2015 the company incurred $5 billion in net shipping costs, a 19 percent jump from the previous year and equivalent to about 5.1 percent of sales.
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But increasing the purchasing threshold, according to experts, is not so much about covering shipping costs as it is about nudging customers to join Prime, a loyalty program whose members spend nearly twice as much as nonmembers. They also pay an annual $99 fee, which translates into billions in revenue for Amazon.
In exchange, Prime members get two-day shipping covered, in addition to other perks, such as a video-streaming service with exclusive offerings, a music service and even restaurant delivery in some areas.
Now that customers have to spend close to $50 per order to get free shipping, Prime “becomes a much more interesting and compelling offer,” says Tom Caporaso, the CEO of Clarus Commerce, an e-commerce company that focuses on logistics.
Given that “right now it’s very much a land grab around e-commerce,” Amazon’s push to acquire the loyalty of even more customers makes sense, Caporaso says.
Amazon spokeswoman Ana Rigby said the company “from time to time” reassesses its shipping options.
Amazon won’t disclose how many members the Prime program has but says its number grew 47 percent in the U.S. in the past year. That exceeded even a 35 percent growth estimate from Consumer Intelligence Research Partners, which had estimated Prime membership numbered 54 million.
There might be another element to Amazon’s strategy. The more Prime members there are, the bigger the incentive for third-party sellers to pay the tech giant to handle logistics through the Fulfillment by Amazon (FBA) program.
FBA sellers can offer their customers the same Prime shipping perk Amazon has for its own products. The number of third parties subscribing to FBA grew more than 50 percent in 2015, the company says.
Shipping and logistics have become a big focus for Amazon, which has built numerous fulfillment centers and bought a fleet of trucks. Reports say the company has been considering a big-scale cargo operation that could include ships and airplanes, as well as last-mile delivery capacity to rival UPS and FedEx.