The move is widely seen as an effort by Amazon to encourage more customers to purchase Prime memberships.
A Prime subscription, which costs $99 per year, gives members free two-day shipping on their Amazon orders.
By some estimates Amazon grew Prime memberships by 35% last year, meaning 54m people – nearly half of Amazon’s customers in the US – now have a Prime subscription.
While Amazon is grappling with growing fulfillment costs, there is little doubt that Prime, with its free two-day shipping benefit, has become a formidable competitive weapon for Amazon.
Indeed, according to Consumer Intelligence Research Partners, Prime members spend $1,100 each year on Amazon, nearly double their non-Prime counterparts.
With a $49 threshold for free shipping on most orders, many of Amazon’s customers still without Prime membership may find that that Prime membership pays for itself after just a few orders.
An opening for other retailers?
But the higher threshold could also create opportunity for Amazon’s competitors.
As The Wall Street Journal notes, the $49 minimum is a dollar shy of WalMart.com’s $50 minimum, and higher than other retailers.
Target.com, for example, has a $25 threshold for free shipping, and upstart online retailer Jet.com offers free shipping at Amazon’s old minimum, $35.
For online shoppers not loyal to Amazon, lower thresholds for free shipping could be a factor in deciding where to make a purchase.
With this in mind, retailers that now find their minimums lower than Amazon’s would be wise to highlight their free shipping offer to their advantage.
Furthermore, retailers that still have a higher threshold, but less so, might find that they have the opportunity to undercut Amazon and win business from consumers who are sensitive to shipping costs.
The long game
Of course, Amazon is clearly playing the long game.
Right now, it is clearly more focused on improving customer experience than reigning in fulfillment costs by any means possible.
There are risks here to be sure. For example, there is evidence that Prime might be encouraging purchasing behavior that makes Prime membership unprofitable for the ecommerce behemoth in at least some cases.
But if Amazon is able to win over more consumers through Prime and build out its own superior (and cost effective) fulfilment infrastructure, other online retailers may find that any benefits they can realize from Amazon’s free shipping threshold increase are relatively short-lived.