Amazon Tries to Increase Revenue from Existing Shoppers

Sellers may soon not be the only ones bearing the brunt of Amazon’s restructuring efforts to boost profits.

The retail giant is reportedly testing a higher free shipping minimum for some non-Prime customers and charging Prime members a fee for in-garage deliveries beyond the designated Amazon Delivery day. While this may help Amazon generate an additional source of income, they (and Amazon sellers) also risk losing customers to competitors that offer surprisingly low prices like Temu, TikTok Shop, and Shein.

Related: Amazon is Testing a New Way to Show Product Reviews 

Raising the Free Shipping Threshold

In a statement to CNBC, Amazon spokesperson Kristina Pressentin confirmed that the company is testing a new free shipping minimum for some non-Prime members in selected regions.

Non-Prime customers generally have to place an order with a minimum value of $25 to qualify for free shipping. But that changed for some shoppers on August 28, when Pressentin said Amazon has increased that threshold to $35, while “Prime members continue to enjoy free delivery on over 300 million items.”

The new change seems like an effort by Amazon to align its shipping minimums with that of Walmart, perhaps in hopes of attracting a larger customer base to its Prime service that offers free 1 to 2-day shipping and a host of membership benefits for an annual fee of $139 or a monthly fee of $15.

On the one hand, non-Prime customers may start comparing free shipping offers from different sales channels and decide to take their business somewhere more affordable.

On the other, this could be an opportunity for sellers to increase their sales by implementing value creation strategies that will make customers see the worth of buying add-ons or more expensive products to meet or exceed Amazon’s new free shipping minimum.

• Product bundling. Grouping related products for a slightly lower price than buying individually.
• Cross-selling. Encouraging customers to buy items that complement the product they wanted to purchase. For example, a customer adds a  $25 French Press Coffee Maker in their online shopping cart. With cross-selling, you could recommend them accessories like a milk frother, coffee mug, espresso brush, or reusable straw to ensure a higher single order value.
• Upselling. Influence customers to buy pricier items or upgrades to increase their order value. Suppose a customer is eyeing that $25 French Press. In that case, you can highlight an upsell offer for a $50 coffee maker that has more advanced features.

Related: Tiered Discounts on Multi-Unit Orders

Free to Fee: In-Garage Delivery Service

Amazon Prime members currently enjoy free In-Garage Delivery, a service that ensures packages find a secure haven inside garages equipped with Amazon Key openers (accessible via an app), safeguarding them from theft and bad weather. However, this perk is about to change, contingent on the timing of package deliveries.

Starting from October 4th, Amazon is introducing a $1.99 fee for those choosing In-Garage Delivery outside of the designated Amazon Day delivery slots.

As highlighted by reports from The Verge, discontent among members is palpable as posts circulating on Twitter reveal their dissatisfaction with this impending price adjustment, saying “Amazon Key In-Garage Delivery is by far one of my favorite services, but they’re going to charge $1.99 PER DELIVERY unless you choose the Amazon Delivery day option.”

Other customers who commented on the The Verge’s post also share the same sentiment, with one wondering if the change is “bad for Amazon? This was a “safe” option for a lot of consumers and beats dealing with potential package theft when your packages are left outside. I’m not sure what Amazon really wins here outside of trying to force more people to choose their Amazon Day shipping.”

In reply to said comment, one poster wrote “Not completely bad. Just bad for those that want deliveries outside of their designated “Amazon Delivery Day of the week”. So, are you patient or needs things ASAP? ASAP will cost money, like it should IMHO.”

Some customers speculate that the extra time drivers take to access the codes to open garages is slowing down deliveries, which can cost Amazon money.

Delivery is expensive business, so it is no surprise Amazon is trying to get as much juice from the squeeze as possible. In a study conducted by the data validation firm, Loqate, it was found that within a sample of over 140,000 online orders, ecommerce companies experienced an 8% initial delivery failure rate. These mistakes, with an associated average cost of $17.20 per occurrence, collectively incurred a substantial expense of over $193,000 among the 300 companies included in the survey.

In addition to delivery cuts, Amazon has been aggressively reducing costs through job cuts and eliminating excess warehouse space. The company has also recently brought back its holiday peak fulfillment surcharge for FBA sellers and started charging an extra fee for those who participate in the Seller Fulfilled Prime program. 

All of this contributes to the effort Amazon has been making in recent years to pull up out of the post-Covid tailspin it found itself in. Time will only tell whether these changes will be good or bad news for the retailer. Unfortunately, unless you factor in the broad possibility of more financial stability for Amazon, we can’t see an angle on this that serves the customer or the seller.