How low can they go?
Amazon recently lowered its threshold for free shipping from $49 to $35. This comes just weeks after Walmart moved to a $35 minimum. But the retail chain still has the edge: Walmart’s delivery window is only three to five days, while Amazon shoppers will still have to wait five to eight days.
At the time, Walmart also announced free two-day shipping for 2 million items on its site and did away with its ShippingPass membership—which mimicked Amazon Prime’s free shipping model.
The fight to offer the best delivery options comes at a time when consumers are buying online more than ever.
Gartner Research predicts online spending will reach $440 billion in 2017. And with a plethora of options, it’s the perks that often drive consumers’ buying decisions. In fact, nine out of 10 shoppers say free shipping is the biggest single incentive when buying online, according to Walker Sands Future of Retail study.
These statistics show why companies are constantly tinkering with their delivery promotions to find new ways to offer better deals.
And for Amazon, it’s paying off.
Market intelligence firm L2 says Amazon generated $6.4 billion from Prime and other subscription services in 2016, which nearly covers the company’s $7.2 billion in shipping costs. And free shipping means Prime’s members, which the company estimates ranged between 58-65 million people last year, are incentivized to shop on the site for a wider range of purchases since they know they can get their items delivered for free.
The ecommerce giant is also looking for ways to skirt traditional third-party delivery methods as increased online sales put the pinch on companies like FedEx and UPS. In addition to its Prime Air cargo planes, Amazon has secured a patent for a floating distribution center, which would service its drone delivery force.