This holiday season, Amazon will offer free shipping on all orders, no minimum purchase price required, for the first time. (Credit: Getty Royalty Free)
The high-stakes battle to win your holiday spending is heating up: For the first time since it introduced free shipping in 2002, Amazon will ship U.S. customers’ orders for free this holiday season without requiring them to meet its regular $25 minimum-order threshold.
The offer begins Monday and lasts for a limited time to ensure delivery in time for Christmas, the Seattle online giant said, adding it has the largest free-shipping selection in the U.S. with “hundreds of millions” of items available. For its Prime members, who already qualify for free two-day shipping on more than 100 million items without having to make any minimum order, a spokeswoman said Amazon has expanded the selection for free same-day shipping to more than 3 million items — up from one million. Without specifying, she said the geographic reach of Prime free same-day delivery service has been expanded to such an extent that the service is now available to “tens of millions” of Prime members.
Amazon’s latest move comes at a time when rivals including Walmart and Target are doubling down on their own last-mile delivery game, including buying or partnering with delivery or fulfillment startups. In raising the bar on their own two-day free shipping offers, Walmart and Target are seeking to convince shoppers they can enjoy the same perk without shelling out $119 a year for an Amazon Prime membership, which, to be fair, comes with other benefits including Prime Video and Prime Music.
Walmart, for instance, has partnered with startup Deliverr to expand free two-day shipping to its third-party marketplace sellers, the growth of which is key to expanding Walmart’s number of items for sale to give customers the convenience of a one-stop shop. (Amazon generates more than half of its paid-unit sales from third-party sellers). Walmart also opened a fulfillment center in the Bronx and is exclusively using Parcel, the same-day delivery startup it acquired in 2017, to allow customers from its urban millennial play, Jet.com, to schedule three-hour windows for same-day or next-day delivery.
Target, for its part, recently began to offer two-day free shipping from November 1 through December 22 without the $35 minimum purchase it typically required. Both Walmart and Target are also among brick-and-mortar retailers that are capitalizing on their physical store fleets — many of which are much bigger than Amazon’s Whole Foods — and touting services like curbside grocery pickup to attract shoppers.
(Amazon’s Whole Foods, for instance, with under 500 locations, can deliver grocery via Prime Now in 60 cities and process grocery for pickup in about 10. In comparison, Walmart recently said its pickup locations will rise to 3,100, up from 1,800-plus. It also said it will expand grocery delivery to 1,600 locations, with plans to reach about 40% of the U.S. population by the end of this year.)
To be sure, Amazon rivals still have a long way to go to catch up. A Rakuten Intelligence study found that the market share Walmart and Target each held stood at an average of under 2% through the first half of this year, while Amazon’s share of the U.S. e-commerce market, excluding Amazon Fresh, totaled 34%. The number of items both retailers have for two-day free shipping is also much smaller than Amazon’s. (Target’s free two-day shipping offer this holiday, for instance, applies to “hundreds of thousands of items.” Walmart lists “millions” of items on its website.)
Still, the onslaught from rivals on all fronts is putting pressure on Amazon. In a sign of increased concerns that rivals like Walmart may begin to steal some of its thunder, Amazon’s shares slumped recently after investors ignored its much-better-than-expected Q3 profit and focused instead on its slowing e-commerce growth and disappointing holiday profit and sales outlook.
While Amazon has been doing a better job controlling costs and is using things like robots at some fulfillment centers to slow the rate of square footage growth, its latest shipping salvo likely won’t come cheap. (And the same goes for other retailers.) A case in point: Despite reporting Q3 worldwide shipping costs that grew at the slowest pace in at least six quarters, Amazon still saw shipping costs last quarter rise 22% to $6.6 billion. That was almost double what it made in operating income of $3.7 billion.
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