Amazon has recently announced that all customers—Prime or not—will be eligible for free shipping throughout the 2018 holiday season. It’s the first time in memory that Amazon has dropped the $25 minimum requirement to be eligible for free shipping.
This move will make Amazon an even greater powerhouse during the 2018 holiday season as it breaks down barriers against both online and brick and mortar competition.
What does Amazon’s free shipping promotion look like for non-Prime and Prime members, and what is their goal in implementing this deal for the 2018 season?
What is the Free Shipping Promotion?
Amazon is now offering the largest selection of items in the U.S. that are available to ship for free during the holiday season. There are a few notes to be aware of with this deal.
Details about the Promotion:
The promotion applies to all products and there is no minimum order threshold. There are hundreds of millions of products available on Amazon that qualify for free shipping. Free shipping only applies to no-rush orders (5 to 8-day shipping) for non-Prime members. Prime members still have free two-day and same-day shipping. Amazon has not announced the length of the promotion. Last year, free shipping ended on December 15, but Target is ending December 22 this year.
The rest is self-explanatory. You buy anything on Amazon throughout the holiday season, and you get free shipping!
Will this Promotion Upset Prime members?
It’s possible that at first glance Prime members might feel slighted by this announcement. Prime is Amazon’s membership, where users pay approximately $119 per year (unless they’re a student) to have exclusive Amazon benefits. Most Amazon Prime members use it for the free, fast shipping as well as the video and music streaming.
Amazon Prime is known for its free two-day shipping, same-day delivery, and no-rush shipping. With the announcement that everyone will have free shipping benefits during the holidays, those Prime members paying $119 for special perks might feel a little hurt.
But fear not, Amazon is rolling out even more benefits for Prime members alongside this promotion.
Free Same-Day Shipping
While every customer gets free no-rush shipping for the holidays, Amazon will offer Prime members free same-day shipping on more than 3 million items. This is the greatest selection of same-day shipping units offered in the U.S., and it includes everything from toys and electronics to fashion and home goods. This delivery speed is ultimately what separates Amazon from its other online competitors.
Whole Foods Delivery
Prime members in more than 60 cities will also have access to Whole Foods delivery through Prime Now. Amazon boasts a one-hour delivery time for Prime members. This means that if you forget something on Thanksgiving, you can order it through Whole Foods online and have it arrive on your doorstep within the hour—all while you can keep cooking and watching the parade.
We anticipate more Prime members will utilize the Whole Foods delivery service and Prime discounts this holiday season to save on their holiday goodies and avoid braving the winter weather.
Prime signups are actually one of Amazon’s biggest revenue streams since Prime subscribers are more likely to be loyal, repeat customers with Amazon. During the 2017 holidays, Amazon signed up 4 million new Prime customers, and they’re looking to gain even more of these memberships during this holiday season.
Because they want to encourage more Prime signups, we anticipate that Amazon will continue to put Prime members first for delivery and Lightning Deals this holiday season.
Why is Amazon Offering Free Shipping?
Amazon is determined to capture the majority of holiday revenue. It is a highly competitive organization, and they not-so-subtly measure their success on how well they crush their competitors. The holiday season is one of the most competitive times of the year, and grabbing customers is critical to yearlong success.
Grabbing holidays customers isn’t easy. In fact, consumers tend to lose all sense of loyalty during the holiday season. They look for low prices, great discounts, free shipping, and additional perks. Someone who shops at Amazon year round has no trouble purchasing from Walmart for the holidays if it means they’ll save $10. This shift in consumer mindset makes the holiday landscape undeniably fierce, especially for online retailers.
So Amazon sees the value in offering free shipping as a key competitive advantage during the holiday season.
Amazon announced their free shipping promotion after Target and Best Buy announced their own promotions. Likely, they were waiting to see what their competitors did so they could one-up them and offer a greater promotion. And it worked.
Last month, Target announced they would offer free two-day shipping to all customers with no order minimum. The deal will last through December 22 (which means Amazon’s might last until December 23 this year). Best Buy also dropped their minimum order threshold for free shipping, but they don’t have a guaranteed time frame for delivery.
It’s interesting to look at a comparison chart for the 2018 holidays, though. Amazon’s non-Prime customer still doesn’t have an advantage over Target’s consumer, as Target is offering free two-day shipping to all customers. This is likely because Amazon still wants to elevate the Prime customer experience.
This isn’t the first time Amazon has made changes to their business model to compete with the big box retailers online. Amazon used to have a $49 minimum order requirement to be eligible for free shipping. When Walmart released a free two-day shipping with a $35 minimum order quantity, Amazon lowered their threshold down to $35 and then later down to $25. Amazon refuses to be beaten this holiday season.
Brick and Mortar Retailers
Physical storefronts still dominate the holiday landscape. Nearly 87% of 2017 holiday sales came from brick and mortar stores. Omnichannel retailers with a strong integration of both online and brick and mortar stores saw the greatest success last year.
Amazon took nearly half of all Black Friday 2017 sales as well as almost 50% of total online holiday sales, but they’re lacking in the brick and mortar front. While Amazon is growing their physical store presence, they are still a primarily online platform. And they’re not pleased that brick and mortar retailers still have the upper hand during the holidays.
Two of the major reasons that physical storefronts still “win” Q4 is because:
Customers don’t want to pay for shipping on top of the price of their gifts
Customers want their gifts fast, especially if it’s a last-minute gift item
Amazon’s free shipping helps overcome some of these concerns. By offering free shipping, they’re helping to reduce the receipt cost that customers want to avoid during the holiday season.
This doesn’t necessarily help with customers wanting immediate gifts, because Amazon’s promotion only applies to no-rush shipping. Prime members now have access to free same-day and two-day shipping on millions of items. This takes away the barrier of delivery time, while also encouraging more customers to signup for Amazon’s coveted Prime membership if they want the quick convenience of online shopping.
With Amazon and Target taking serious steps to break down barriers for online holiday shopping, experts think that e-commerce may—for the first time in history—surpass (or at least meet) physical storefronts during this season.
Check out our post “Trends In Brick And Mortar Retailers During The Holiday Season” to learn more about how companies are balancing online and physical storefronts during the holidays.
Amazon’s free shipping for the 2018 holiday season, as well as competitors like Target and Walmart, could completely change e-commerce's involvement in Q4. We anticipate that Amazon will take an even larger chunk of the holiday pie, which signals even more advancement for the retail giant in the 2019 year.
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