Why Amazon’s new higher minimum order value is a win-win
Amazon’s use of cause and effect to motivate shoppers is one of the keys to its continuing success. Consider the recent 40% increase in the minimum order required for free shipping (from $35 to $49). On the surface it looks like a big negative for shoppers, but it’s actually a win for the customer – and a big win for Amazon. Occasional customers may not like it, but regular customers will be incented to sign up for Prime, a program that delivers a lot more value (and encourages a lot more spending).
With Prime, customers lower their annual shipping costs, increase delivery speed, and get additional popular benefits. And Amazon gets a significantly larger share of wallet – six months after signing up, these customers are spending a third more across all Amazon programs according to research by 1010 Data.
The fee change is one of many recent Amazon innovations (among them a Treasure Truck that brings event shopping to Seattle neighborhoods and new pickup lockers that increase convenience in Europe). All these initiatives have driven up Amazon’s spending on order fulfillment, but that’s a good thing. It’s the most challenging part of the business, and it’s the one place where a meaningful improvement can add the most value.
Who else is pushing the envelope like this?
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