Amazon halves free shipping limit to $25

By Reed Stevenson

SEATTLE: Amazon.com Inc. on Monday said it will start offering free shipping on orders of more than $25, halving its previous threshold, as the No. 1 Web retailer cuts prices to boost growth. Like its two previously free shipping offers, first for orders above $99 then for $49, Amazon said it would offer the incentive on a trial basis for three to six months and decide at the end whether to make it permanent.

Jeff Bezos, Amazon founder and Chief Executive, said in a statement that it would now be cheaper to shop at Amazon than at a physical store. "With Amazon.com's 30 percent off books over $15 and now Free Super Saver Shipping on orders over $25, there may be reasons to shop in the physical world, but price is not one of them," Bezos said in the statement.

Amazon, which started selling books online in 1995 but now sells a variety of consumer goods such as electronics, kitchenware and toys, has long argued that its wide selection and product information would draw customers to its site, even if prices were not the lowest available.

Now, as Amazon uses its size as the Internet's largest retailer to drive prices lower and weed out competitors, it is beginning to mature and behave like retailing giant Wal-Mart Stores Inc., analysts said. "Now they're in a better position to be offering free shipping," said Allyson Rodgers, analyst at Seattle-based Ragen MacKenzie.

"If they can drive volumes and pass that on to the customers, combined with their full-service offering, I'm enthusiastic about that," Rodgers said. Online retailing rival Buy.com, which has been offering discounts to Amazon's published prices to lure customers away from the online giant, offers "no minimum purchase" free shipping from its Web site but only for selected merchandise.

In its latest earnings release, Amazon cited its free shipping program as one reason why it was able to boost second-quarter sales by 21 percent to $806 million, and reduce its net loss to $94 million from a net loss of $168 million a year earlier. Shares of Amazon were down 32 cents at $14.85 in late afternoon trading. It shares are up more than 38 percent this year, compared to a 30 percent slide in the Nasdaq Composite index in the same period.

At the end of the current three- to six-month trial, Amazon will decide whether to make the offer permanent, switch back to a different threshold or do something else, Amazon spokeswoman Kristin Schaefer said. "The one thing you hear pretty consistently from customer focus groups is that they would prefer not to have to pay shipping charges," Schaefer said. The Super Saver Shipping offer does have a caveat: free orders usually take 3 to 5 days longer to arrive. "We essentially added another class of shipping, but the response to that has been great," Schaefer said.

(C) Reuters Ltd.