Amazon.com is offering a free, three-month trial of its "Prime" shipping service's benefits. Features include free two-day shipping on most items in stock and an upgrade to overnight delivery for $3.99. The offer is being made to shoppers as well as on Prime's sign up page. As many as four other family members can also use the account.
Amazon's founder Jeff Bezos conceded at the annual shareholders meeting last week free shipping will cost the company more than $100 million this year. But he believes the offer is a powerful tool to increase sales.
Bezos is well ahead of the curve, compared to his competitors. Any salesman will tell you it is easier to sell a customer a second item if they have already found the first. Eliminating shipping makes getting that first sale easier, too.
Second, as more e-merchants begin to charge sales taxes, the perceived value of shopping online is lessened. Removing the nagging additional cost of getting the product from there to here is a way to mute that aggravation.
Finally, eliminating shipping costs and tying it into the company's "1-Click" ordering system removes a lot of friction with a transaction.
But of course, somebody's paying. And as fuel costs rise, the expense is going to be borne ever more by Amazon - resulting in a smaller profit margin.
While this is not exactly, "We'll lose on every sale but make it up in volume," the move is certainly evidence Bezos wants to amp up Amazon's sales more and more and has his eyes on a place on the sales graph years down the road when, perhaps, more short-term focused competitors may have slipped off into the ditch.
I participated in the free premium offer during the holidays when it was last offered and um fell in love with it. Unfortunately I still coulndn't justify a $75 renewl for the continued speedy service. I doubt they lost money becuase knowing that I didn't have to have orders over $25 to qualify for free shipping had me ordering little items a lot more frequently during that time period.
Posted by: Tara | Jun 01, 2006 at 14:40