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Amazon.com hikes minimum spending to qualify for free shipping

5:14 AM, Oct 23, 2013   |    comments
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SAN FRANCISCO -- Amazon.com raised the threshold on what orders qualify for free shipping in the U.S., the first time the e-commerce giant has made such a change in more than a decade.

Online shoppers now need to spend at least $35 on Amazon.com to get their orders shipped free. That is up from $25 previously.

The change comes ahead of the crucial holiday season, when online shopping and package shipping activity soars and Amazon generates most of its revenue.

Amazon did not say why it made the change. However, Wall Street has focused on the company's high shipping costs in recent years and this may be a way to control such expenditure and boost the company's meager profits.

"During 2012, Amazon reported almost $3 billion in shipping losses... or roughly 5% of total sales," Colin Sebastian, an analyst at RW Baird, wrote in a note to investors Tuesday. "This new threshold will reduce the number of transactions that qualify for free shipping."

The change may also encourage more Amazon customers to become members of the company's Prime subscription service. This costs $79 a year in the U.S. and offers free two-day shipping on lots of items.

Indeed, when Amazon announced the increase to the free-shipping threshold on its website, the company mentioned Prime and some of the new features that come with the subscription, such as free video streaming and e-book borrowing.

"The service is so popular that more than a year ago we began shipping more items with Prime than with free shipping," Amazon said, while including a link to a free 30-day trial of Prime.

Prime has been a major driver of Amazon sales because subscribers often come to Amazon first to shop to make sure they are getting value from their $79 annual fee.

RW Baird's Sebastian said the change in the free-shipping threshold may benefit eBay because more price-conscious shoppers may find discounted shipping on cheaper items on that e-commerce website.

Some third-party sellers on Amazon's Marketplace could suffer as lower-priced items sell less. That could encourage these merchants to sell more of their stuff on eBay, the analyst also said.

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By Alistair Barr, USA Today

Gannett / USA Today

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