Amazon Lowers Free Shipping Threshold

Amazon.com (Nasdaq: AMZN) has announced it will lower the threshold for free shipping to US$49 in a move that the company has called a long-term test to raise the stakes for itself and other online retailers.

Amazon said a trial of the service -- which halves the previous minimum order size of $99 for free shipping on certain purchases -- will run for three to six months. That time frame means the promotion could extend into the 2002 holiday shopping season.

After the trial period, Amazon will determine whether the Free Super Saver Shipping promotion can be continued.

"We're eager to see how customers respond," company CEO Jeff Bezos said. "We hope we'll be able to make it permanent."

Risky Business

"It's a bit of a risk, but Jeff Bezos has never been afraid to take risks," Morningstar analyst David Kathman told the E-Commerce Times. "They're obviously seeing how low they can put the threshold before the negatives outweigh the positives."

While the move no doubt will cost Amazon in the short run, Kathman said, the fact that Amazon has called the promotion a "test" will allow the company to end the deal should additional sales not materialize.

"It makes sense that they're trying this during the middle of the year, typically a slow time for retailers," he added. "Amazon is in good enough shape financially that the company can afford to try something like this."

Six and Counting

The price reduction comes six months after Amazon first made the $99 free shipping offer -- which the company tested during the 2001 holiday season -- a permanent fixture on its site.

That move had a ripple effect in the online community, with some competitors, notably electronics e-tailer Buy.com, quickly following suit.

In addition to Buy.com, BarnesandNoble.com has a long-standing offer in place that waives shipping charges when shoppers buy two or more items at the same time.

Forrester Research analyst Christopher Kelley told the E-Commerce Times that shipping is a major barrier to more widespread adoption of online shopping cited by both seasoned Web shoppers and those who have never purchased online.

"It's a huge idea," Kelley said of the free shipping deal.

Amazon also has unveiled in-store pickup deals with Borders and Circuit City (NYSE: CC), offering another alternative to paying shipping charges.

How Low?

Amazon said the new shipping deal is just another example of its efforts to lower prices. For instance, the company has increased the discounts offered on books twice in the past year.

Bezos has said Amazon's goal is always to look for ways to lower prices. The company has been able to achieve that aim as it continues to improve cost margins through more efficient operation.

Since turning its first profit in the fourth quarter of 2001, Amazon has continued to roll out new promotions and features. Last month, the company added catalog retailers to its site. More recently, it unveiled "Gold Box" offers that give shoppers up to five discount deals each day, primarily in the electronics, kitchen and tools departments.