From The Motley Fool:
E-commerce powerhouse Amazon.com has created a business empire by turning convention on its head.
Though the number of examples seemingly grows with each passing year, one of the most noteworthy, and divisive, e-commerce innovations ushered in by the Seattle-based e-tail giant is its Amazon Prime, which includes free two-day shipping, access to Prime Video and Prime Music, and more.
Viewing Prime as crucial to its long-term success, Amazon continues to find new conversion points to funnel users into Prime, which is precisely how tech investors everywhere should interpret one recent move from the company most likely to dominate the future of online commerce.
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Amazon recently increased the order amount non-Prime members must pay to qualify for free shipping, setting the bar at $49 per order to receive free shipping, a 40% increase from the $35 level the company established in 2013.
Amazon kept its non-Prime free shipping threshold at $25 per order for the better part of a decade before beginning to raise the level for a minimum qualifying order in 2013. The move likely reflects the growing costs required to operate Amazon’s increasingly complex global network of fulfillment centers. Amazon’s 2014 decision to increase annual Prime subscription prices from $79 to $99 in part also speaks to this trend. However, make no mistake, Amazon’s increasing free shipping minimums should be interpreted, first and foremost, as an attempt to drive more users to become Prime subscribers.
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As a general proposition, though, the fact that the notoriously data-centric Amazon clearly wants to funnel as many consumers toward Prime suggests the service is indeed quite important for the company’s long-term trajectory, which certainly makes sense.
Taking a longer-term view, Prime and its free two-day shipping serves as a valuable tool to give Amazon users incentive to direct as much of their online shopping as possible through the e-commerce giant. This speaks to the titanic growth runway that Amazon’s business enjoys given the relative nascence of global e-commerce that I feel so often gets overlooked in discussing Amazon’s multidecade investment thesis.
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In terms of Prime’s place in this discussion, the service helps give as much incentive as possible to shop through Amazon. In this sense, Prime serves as fantastic tool to help fuel Amazon’s market share growth.
Link to the rest at The Motley Fool