Shortly after a similar move retailer Walmart made a few weeks ago, eCommerce giant Amazon announced it is also lowering the threshold for free shipping to $35.
In January, Walmart decided to shut down the pilot of its ShippingPass program, a fee-based, two-day shipping offering posed as a possible competitor to Amazon Prime. Instead of a membership program, Walmart dropped the free shipping threshold from $50 to $35. And the shipping is faster — in the past, the $50 expenditure only netted consumers 3-5 day free shipping; going forward, $35 will entitle consumers to 2 day shipping.
Walmart’s service was cheaper than Amazon’s — $50 a year vs. $99 — but it was much less robust as it lacked add-ons like music and video streaming or unlimited cloud-based photo storage.
Now, Amazon has also made the change to offer free shipping on online orders of $35 or more.
“If there is one company that has deep enough pockets and the fulfillment network vast enough to compete with Amazon, it’s Walmart, so of course Amazon is watching Walmart like a hawk,” Guru Hariharan, CEO of Boomerang Commerce, told Internet Retailer. “(With) all the moves that Walmart is making, with the reorganization that is happening and the technology investments they have made, Amazon would want to play offense at this point instead of defense and compete with Walmart where they can potentially cause some harm to Amazon’s market share.”
Last year, Amazon adjusted the floor for its free shipping service from $35 to $49.
At the time, it was reported that the change would either turn off a handful of customers, or it might spur as many, if not more, to pull the trigger and join the Prime bandwagon; whereas three or four purchases per year were needed to recoup the cost of a Prime membership in shipping alone initially, the $49 minimum meant customers would make their money back in two clicks.
Lee Gill, group vice president of global retail strategy at JDA, explained at the time that more retailers are finding themselves stuck between progressively bigger rocks and increasingly harder places.
“As retailers have embraced offering consumers less costly alternatives to home deliveries, free click and collect has grown in popularity,” Gill said in a statement. “To now ask consumers to pay for click and collect certainly has its risks. What is clear is that profitability has to be addressed as a matter of priority. This will require both an investment in the supply chain and technology, as retailers seek a low-cost fulfillment model that also delivers exemplary customer service. Amazon has led the way, and this is set to be the key battleground for retailers in the next five years.”