Amazon lowers its free shipping threshold to strike back at Walmart

The atmosphere in the e-commerce world is heating up – after Walmart has tried to beat the Prime following with a program that offers free two-day shipping, Amazon has lowered its free shipping threshold again.

Cheap shipping is one of the biggest motivations for shopping online. According to a 2016 Future of Retail study by marketing firm Walker Sands, almost 9 in 10 consumers say free shipping would encourage them to buy more online.

That’s why Walmart and Amazon are lowering qualification for free shipping. First, Amazon created service called Prime, in which members pay a fixed fee ($99 per year or $10.99 per month.) to secure free shipping on all their eligible purchases.

Prime offers members multiple shipping options, including free two-day shipping nationwide on more than 50 million items, free same-day delivery by 9 p.m. on more than 1 million items in select areas, and free two-hour delivery on some products in select metro areas via its Prime Now option. However, the order must be at least $35 worth of eligible items to get free same-day shipping and have to meet a minimum order threshold for free two-hour delivery.

Prime gives more than fast shipping. Members also receive access to movie streaming, photo storage, Prime Music streaming and 30-minute early access to time-sensitive sales called Lightning Deals.

Shortly after that, Walmart offered free two-day shipping in the U.S. area on eligible orders of $35 and above without having to pay a membership fee. Walmart says millions of products qualify. For more information about shipping options, visit the online help page. Marketplace and freight orders count toward the order threshold, but shipping costs and times vary.

In 2016, also Walmart launched a pilot program called ShippingPass, a membership program that customers signed up for receiving unlimited two-day shipping for $49 per year. The retail giant that has cancelled the program, says all active ShippingPass members will receive a full refund for their subscription.

Business Insider reported that recently Amazon lowered its free shipping minimum to $25 from $35 for customers who aren’t members of its Prime membership program. This is the second time in three months that Amazon has lowered its free shipping threshold.

Amazon is likely hoping that the cheaper free shipping threshold will make them able to compete with Walmart for non-Prime members. But Walmart is still the better deal for those customers because it is offering all shoppers free two-day delivery — something Amazon offers only to Prime members.

“Although non-Prime members can now avoid shipping fees, they will still have to wait for up to a week for their packages to arrive,” said Sarah Engel, the senior vice president of global marketing for the retail analytics firm DynamicAction.

“The fact that Amazon didn’t outright match Walmart’s free shipping timeline shows their continued commitment to the recurring revenue Prime model,” she added.

Walmart has been investing heavily in e-commerce, but it has a long way to go before it catches up with Amazon.

According to Forbes, the main differences are that Amazon is well known for its algorithmic approach to presenting particular products to its customers, as well as using real-time data to fuel dynamic pricing. Walmart, on the other hand, has lagged behind significantly when it comes to building a robust online platform that can even come close to Amazon’s. The absence of an online platform that can collect the volume and quality of consumer data needed for stronger decision making has set Walmart back.

Walmart’s online sales were $13.7 billion in 2015, compared with Amazon’s $107 billion. Walmart is still far ahead in terms of overall sales. Walmart generated $486 billion in fiscal 2016, which is more than three times as much as Amazon’s revenue of $136 billion.

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