Motley Fool has a story about how Amazon appears to be grappling with increased shipping costs - the downside of its Prime program that, for $99 a year, offers guaranteed two-day shipping on more than 100 million items. Fulfillment costs went up more than 43 percent to $25.2 billion last year, as revenue only went up 30.8 percent, which creates a gap that Amazon would like to close.
According to the story, “Amazon has been working to fix this issue for years. Amazon's add-on program, where certain cheaper items are only available as part of a $25 order, reduces Amazon's costs at the expense of forcing Prime members to deal with order minimums for some items. Some grocery and household items are only available though Prime Pantry, which tacks on a $5.99 delivery fee even for Prime members. And some items are only available through Amazon Fresh, which carries an additional $14.99 monthly fee for Prime members and requires a minimum $50 order to avoid a $9.99 delivery fee for each order.”
According to the story, “Amazon has been working to fix this issue for years. Amazon's add-on program, where certain cheaper items are only available as part of a $25 order, reduces Amazon's costs at the expense of forcing Prime members to deal with order minimums for some items. Some grocery and household items are only available though Prime Pantry, which tacks on a $5.99 delivery fee even for Prime members. And some items are only available through Amazon Fresh, which carries an additional $14.99 monthly fee for Prime members and requires a minimum $50 order to avoid a $9.99 delivery fee for each order.”
- KC's View:
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As a way-too-frequent Amazon customer, I’ve noticed this, though it hasn’t bothered me and I haven’t found it getting in the way of my regular shopping behavior.
I do think that these are the things that Amazon has to calibrate carefully - there is a point where Prime no longer would seem like a good deal, though I think we’re a long, long way from that. The thing is, Amazon has so much data and such sophisticated analytics that the odds seem pretty good that it knows where the tipping point is … and can avoid it.
