Top e-retailers toggle their free shipping minimums

As reported by Digital Commerce 360
Thursday May 11, 2017

Amazon drops its free shipping minimum to $25 from $35, and Target moves in reverse.

The amount consumers have to spend to qualify for free shipping is in a state of flux at some top e-retailers.

Amazon.com Inc., No. 1 in the 2017 Top 500, dropped its minimum purchase spend to qualify for free shipping to $25—a threshold it hasn’t used since 2013—from $35.

Meanwhile, Target Corp. this week adjusted its minimum order value to qualify for free shipping to $35 from $25. Target had used the $25 minimum order amount since February 2015; its prior minimum was $50. Target is No. 20 in the Top 500.

Target separately announced it will test a next-day delivery service this summer in the Minneapolis area. The Target Restock program includes more than 8,000 household items such as laundry detergent, paper towels and coffee.

Experts view Amazon’s move as a response to Wal-Mart Stores Inc. (No. 3) changing its free shipping model.

In January, Walmart.com began offering free shipping on orders of $35 or more among some 2 million qualifying products (its prior minimum was $50). At that time, Amazon’s free shipping threshold for non-Prime customers was $49. Shortly thereafter, Amazon adjusted its minimum to $35, and now to $25. Amazon says more than 50 million products qualify.

“This move to shift back to a $25 free shipping price point means that [Amazon is] taking a calculated measure to attract or gain back non-Prime shoppers they may be losing to Wal-Mart or other retailers,” says Sarah Engel, chief marketing officer of Dynamic Action, a retail analytics software vendor.

Amazon Prime customers pay $99 a year to receive free two-day shipping on more than 40 million products and often one-day or same-day shipping, depending on the items ordered and where the customer lives. Members of the Prime loyalty program also receive streaming music and video service for no additional charge and such perks as free online photo storage. Prime has an estimated 80 million customers in the U.S., according to research firm Consumer Intelligence Research Partners.

Adjusting free shipping minimums is a common practice among online retailers. For instance, Toys R Us Inc. (No. 38) in 2015 lowered its minimum to $19 from $49. That $19 was one of the lowest minimums seen outside of free shipping with no minimum purchase. Free shipping with no minimum purchase is an offer more common among department store retailers at the higher end of the market. Toys R Us later readjusted its threshold to the current $29 and occasionally offers free shipping with no minimum purchase as a short-term promotion.

Free shipping is important to most online shoppers. In a January 2017 survey from Internet Retailer, consumers rated having free shipping as the second most-important factor when shopping online, after price. An increasing number of online retailers offer free shipping in some way. Among the 500 largest e-retailers in North America, 387 had free shipping, with or without a minimum purchase price, in 2016. That’s up 28% from 303 in 2015, according to Top500Guide.com data.

Retailers are also paying more heed to faster shipping options, although consumers say it is of lesser importance to them—it ranked fourth in January survey. 334 Top 500 retailers in 2016 offered a next-day delivery option, up from 328 in 2015, and 31 offered same-day delivery, up from 26 in 2015.

A separate consumer survey conducted by Internet Retailer and Bizrate Insights also demonstrated free shipping is more important to shoppers than fast shipping, and most shoppers will wait longer for a delivery if shipping is free.

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Ken Wood is the founder of LJM Consultants. LJM helps clients negotiate “Best in Class” UPS/FedEx agreements. LJM was recently named the “best parcel auditing company in America” and was also inducted into Inc. Magazine’s Top 500/5000 fastest growing companies in America for 2013. To learn how LJM Consultants can help your company get the parcel contract you deserve, call 631-844-9500 or email kenwood@myLJM.com.