First spotted by BestBlackFriday.com, Amazon’s shipping page as of May 8 said all orders of $25 or more will qualify for free shipping. The items have to have the free shipping tag on them in order to be included.
In February, Amazon slashed the free shipping order size to $35 from $49 for non-Prime members and has now reduced it further. While Amazon is by far the most dominant ecommerce player in the U.S., the move to lower the order size to qualify for free shipping could be aimed at taking on Wal-Mart, which is getting more aggressive online. In April, Wal-Mart rolled out a new program dubbed Pickup Discount in which customers who make purchases online but pick them up in the stores will get discounts. Amazon’s new minimum order size for free shipping could be in response to that given it doesn’t have the thousands of physical stores that Walmart has. (See also: Walmart E-Commerce Intimidating Amazon.)
BestBlackFriday.com noted Amazon typically doesn’t make a lot of noise and fanfare when it makes shipping requirement changes. The move is an about-face for Amazon which in October of 2013 raised the minimum order size to $35 from $25 and in May of 2016 increased it to $49 from $35, only to decrease it back to $35 in February, noted BestBlackFriday.com. With the free shipping, non-Prime members get their items in five to eight business days, unlike Prime members who get free two-day shipping. Prime members pay $99 for the service and also receive streaming TV, movies and music and no minimum purchase size for the free shipping, reducing any concerns about cannibalization with the lower order requirement for non-Prime members. (See also: Amazon Offers 20% Discount on Its Prime Membership.)
Amazon has long been tight-lipped about its Prime members, but in its annual report filed in February, the ecommerce giant disclosed Amazon Prime and other subscription services rose 42.1% to $6.4 billion in 2016. That figure compares with an almost 61% growth rate in sales to $4.5 billion in 2015. Assuming that 90% of the figure comes from Amazon Prime, analysts at Morgan Stanley have calculated that the service has 65 million members, a majority of whom are in the United States. Amazon Prime members are estimated to spend twice as much as non-Prime members. The filing didn’t provide much information on the profit margins of Prime, which is important because of the low operating margins associated with its retail business.