Starting Monday and for an unspecified limited time, all Amazon customers — and not just Prime members — will get free shipping with no minimum purchase, which the e-commerce giant in a press release said will apply to "hundreds of millions of items."
Amazon also emphasized that Prime members still have some advantages: In many areas they're privy to free same-day delivery on more than three million items, Prime members in more than 60 cities can get delivery in as little as an hour from Whole Foods Market through its Prime Now program, and all Prime members get free two-day shipping on more than 100 million items, the company noted.
The news comes as rivals have also boosted their free delivery. Target last month, for example, announced free two-day shipping between Nov. 1 through Dec. 22 with no minimum purchase or membership required. And Walmart has expanded free two-day shipping (with a $35 minimum) to "millions of additional items" sold by third-party sellers on its online marketplace, and customers can return marketplace items to any Walmart store.
Thanks to its perk-heavy Prime membership, Amazon has long enjoyed an edge over legacy retailers because those customers get free two-day shipping. But rivals, which already have something of an advantage during the season because they have so many stores, have managed to yank that away this year by offering their own free, swift shipping options.
Physical stores still rake in more than 80% of holiday spending, even though their share is decreasing, and they've blunted that too, by boosting their own e-commerce, according to a report from e-commerce analytics firm Cardlytics. Brick-and-mortar retailers' share of spend fell nearly 2% between 2016 and 2017, but their online and mobile share is rising, according to the report, which was emailed to Retail Dive.
Amazon is apparently unwilling to let that stand. "Amazon's announcement this morning that it was escalating the shipping 'arms race' by offering free shipping for everyone, not just its Prime members, for a limited, but undisclosed, time this holiday season is yet another example of the steps retail 'heavyweights' such as Amazon, Walmart, Target, etc. will take to continue to expand market share, and they will use every weapon in their arsenal to accomplish this," Moody's Investors Service Lead Retail Analyst Charlie O'Shea said in comments emailed to Retail Dive.
Free shipping is an easy call to make at the holidays these days because so many shoppers are looking for it, but it'll cost retailers who make it, he also said. On-time delivery of gifts, for example, is a concern for 91% of consumers this year, up 6% from 2017, according to delivery service Dropoff's annual holiday survey. While retailers are facing more delivery demands, they could also be entertaining more last-minute shoppers: 77% say they plan to shop at the last minute in 2018, a 15% rise over last year.
"Free shipping is one of the easiest promotions to execute for a retailer, and is certainly popular among consumers, however it is a very costly initiative to undertake," O'Shea said. "In Amazon's case, shipping costs for FYE 2017 totaled almost $22 billion, with around $7.4 billion in Q4, and the LTM [last twelve months] through Q32018 stands at around $26 billion against LTM non-AWS revenue of around $198 billion," added O'Shea. "Amazon's patient and seemingly profit-agnostic shareholder base provides the company with the flexibility to offer this type of costly promotion, which is a unique competitive advantage."