Amazon.com Inc. raised the minimum order price to get free shipping by $10, to $35, a move that should reduce its massive shipping costs and could drive more customers to its Amazon Prime service.
In a blog post, the company noted the increase was the first change in the free-shipping offer in more than a decade. An Amazon spokeswoman declined to say what percentage of its orders ship for free using its Super Saver Shipping offer.
The announcement comes two days before Amazon releases its quarterly results, when analysts often press for information about company efforts to boost profits. It also comes just as the holiday shopping season begins, when Amazon racks up its biggest sales, but also its highest shipping expenses.
In 2012, Amazon reported $2.9 billion in net shipping costs. That’s the difference between its shipping revenues, the amount shoppers pay to have items shipped, and its shipping costs, the amount Amazon pays to ship those items.
Amazon is also nudging customers toward its Amazon Prime service with the move. The $79-a-year service offers free two-day shipping on more than 15 million items, as well as access to its Amazon Prime Instant Video services, a video streaming offering that competes with Netflix.
In its blog post, Amazon notes that “millions of Amazon customers have already made the choice of faster shipping by becoming Amazon Prime members.”
Having paid that subscription fee, Prime customers often try to justify the expense, ordering from Amazon more often than non-Prime shoppers.
In a research report, Colin Sebastian, an analyst with Robert W. Baird & Co., also speculated that Amazon may be trying to increase the overall “basket” size, since many shoppers “will purposely hit the $25 level in order to get free shipping.”
sponsored Jargon is confusing, by definition. And the financial world has its own set of cryptic words.