Dive Brief:
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About a year after raising its free shipping minimum for non-Prime customers to $50, Amazon has dropped it back down to $35, according to its website.
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Once again, $35 worth of eligible goods or $25 worth of books will garner free two-day shipping. Prime members, who pay $99 per year for a host of perks, enjoy free two-day shipping on many items regardless of order size.
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The move could be in response to a challenge from Wal-Mart, which recently eliminated its “Shipping Pass” membership (free two-day shipping on many items but no other benefits) to open up free two-day shipping to all customers purchasing orders over $35, shipping to stores for free on eligible orders.
Dive Insight:
Wal-Mart’s so-called Shipping Pass wasn’t ever much of a challenge to Amazon Prime. Amazon’s members enjoy a host of perks beyond free two-day shipping, which Wal-Mart’s service never offered, including video streaming, music streaming, free photo storage and extra rewards for those that have Amazon’s credit card.
While Wal-Mart e-commerce chief Marc Lore last month seemed to describe the move as a challenge to Amazon Prime, it’s more of a challenge to Amazon’s non-prime membership, which are less sticky because they haven’t ponied up any membership dues. That not only gives them more freedom to shop around, but also suggests they may have more interest in saving money than enjoying Amazon Prime’s bonus advantages. Keith Anderson, Profitero VP of strategy and insights, compares that to cable television customers who'd rather pay à la carte, rather than for a slew of channels they'll never watch.
Amazon has complicated the disruption by Wal-Mart (or any competition) by quietly lowering its own free shipping minimum for non-Prime members. That could challenge its position somewhat, by increasing its fulfillment costs (a headache for the e-commerce giant) and diluting the value of a Prime membership. But if, as Lore said last month, free two-day shipping is “table stakes” for retailers, Amazon has now anted up, making Wal-Mart’s store and price differentiation all the more important.