Amazon.com Inc. doubled the cost of a minimum order to qualify for free delivery in the UK, seeking to convert occasional shoppers into Amazon Prime members who pay an annual membership fee in exchange for delivery discounts.
The move follows Amazon’s first drop in international revenue in at least nine years. Amazon reported $7.75 billion in overseas sales in the first quarter, down 1.8 per cent from a year earlier, largely attributable to the strong dollar.
The Seattle eCommerce retailer on Friday announced on its website that UK shoppers now must spend 20 pounds ($30) or more to quality for free delivery, rather than 10 pounds. The policy change was followed by a pitch for customers to pay 79 pounds a year for Prime membership, which also includes online video streaming. The minimum book order for free delivery remains unchanged at 10 pounds.
Amazon made a similar change in the US in 2013, boosting the minimum free delivery order to $35 from $25. The company said Prime membership grew more than 50 per cent in 2014 from a base of “tens of millions.” Prime members in the US pay $99 annually for membership, and spend more than non-Prime members.
Raising the minimum order size for free delivery will encourage more people to join Prime and boost revenue rather than anger customers, said Michael Pachter, an analyst at Wedbush Securities Inc. in Los Angeles.
"When they raised the minimum order size for free delivery in the United States, hardly anyone complained," he said. "It doesn’t make sense to offer free shipping on something that costs $10."
Despite investments in nations such as China and India, Amazon has struggled internationally to match its traction with American shoppers. Overseas revenue accounted for 34.1 per cent of all sales in the first quarter, from 39.9 per cent a year earlier.
In March, Amazon opened a store on Alibaba Group Holding Ltd.’s Tmall.com in an effort to reach more Chinese shoppers.
News by Bloomberg, edited by ESM
