Does Free Shipping Make You Spend More Money?
Good news for those who shop on Amazon but are not the main customer: They have dropped the free shipping minimum again . While it dropped from $ 49 to $ 35 earlier this year, it has now dropped to $ 25. They’re trying to keep up with Walmart , but here’s what that means to you as a consumer.
Walmart and Amazon go head-to-head, and after Walmart announced a $ 35 free shipping threshold in January , Amazon decided to increase them:
You will receive free shipping if your order includes at least $ 25 of eligible items. Any item with a “FREE Shipping” message on the product detail page made and delivered by Amazon is eligible and contributes to your Free Shipping Minimum Order amount.
If you are a Prime customer, this could make you rethink your membership. Amazon Prime comes with all sorts of cool perks like music and instant video, but the top one is obviously free shipping. Now that the threshold has dropped, it could impact actual savings . If most of your purchases are worth $ 25 or more anyway, you can skip Prime (although the fast two-day shipping might still be worth it). Your own mileage may vary, but this should be considered.
Overall, this step is really good for consumers because 1) we love our free shipping and 2) the lower the threshold, the less we spend.
When companies offer free shipping thresholds, customers are definitely paying more to reach those thresholds. Well, maybe you won’t, but there is research to show that thresholds really affect how much money customers spend. Wharton School reported (link is ours):
Data from comScore (PDF), a company that tracks web browsing and shopping behavior for academic research, has documented the impact of these changes. When a $ 49 purchase triggered free shipping, the average number of products per order was 3.31. When the threshold fell to $ 25, the average number of purchases fell to 2.53. ComScore data includes 45 shoppers who made a purchase on Amazon.com when both thresholds were met. These consumers were spending $ 17 less on one “free shipping” order below the lower threshold and bought 1.82 fewer items.
Basically, the higher the shipping threshold, the more we tend to buy crap. As Wharton marketing professor David Bell said , we would rather save $ 6.99 on shipping than get a discount that saves us $ 10 in total. Shipping + handling feels like tax, a price we only pay for purchases. We’re not really getting anything extra for our money, so if we can skip that cost, we’ll be happy.
Of course, all of this still means you are likely to spend more money, even with the $ 25 threshold. After all, this is why companies like Amazon are promoting these offers – this is how they make more money. How to deal with this? Focus on your bottom line, not the discount. See how much you’ll spend in total, with and without free shipping. Are you spending $ 35 on free shipping when you would otherwise spend only $ 10? We’re starting to see $ 35 as a better deal because we get more stuff with it. However, this may not be the best option for your budget. Comparing the two numbers can help you make a more objective decision.
Sometimes free shipping is worth it. If you were going to spend $ 22 on something and shipping will cost you $ 6, it might be worth spending $ 3 on what you need anyway. You will save money and get a new pack of sponges, toilet paper, or whatever you buy on Amazon. Do the math and you can be sure that offers aimed at you also work in your favor.