Amazon.com slashed in half the amount customers need to spend to have merchandise shipped for free as the Internet retailer seeks to boost sales.
Shoppers who buy $49 or more of books, compact discs or other merchandise through the Web site may choose the free shipping option, spokesman Bill Curry said. Customers previously had to spend $99 to qualify for the offer. Those who select the option will have to wait an additional three to five days for the orders to be sent, he said.
Shipping fees have been a major obstacle for online retailers trying to gain market share from traditional stores, analysts said. The lower required purchase level may encourage more shoppers to place their orders through Seattle-based Amazon, analysts said.
"It was difficult for a lot of people outside of the holiday season to find $99 books that they wanted to buy," said Ken Cassar, a senior analyst with Jupiter Research. "Amazon had to know they were losing a lot of business because of that threshold."
The retailer plans to test the new level for three to six months, Curry said. Items must be mailed to the same U.S. address to qualify. Some goods, such as toys or baby products, are excluded, according to Amazon's Web site.
Amazon, which had its first profit as a public company in the fourth quarter of last year, began offering discounts of 30 percent on books of $20 or more last year. In January, the company began the free-shipping offer for orders of at least $99; in April, it began offering the 30 percent discount on books costing $15 or more.
The system reduces Amazon's costs because more packages can be shipped together to the same region, Curry said.
The lower threshold may hurt margins because the company will have to cover more of the shipping costs on its own, Cassar said. "They have a lot less margin for error," he said.
The $99 offer didn't seem to hurt margins in the first quarter, Cassar said. Amazon's first-quarter loss narrowed to $23.2 million from $234 million. Gross margin, or sales minus the cost of goods sold, widened to 26.33 percent of sales from 26.07 percent.
"We will be watching to make sure the economics of (the new free shipping offer) are sustainable," Chief Executive Officer Jeff Bezos said in an interview on CNBC. "We'll have to do that over a long period of time."
Barnes & Noble.com, the second-largest Internet bookstore in the United States after Amazon, offers free shipping when customers buy at least two items, with some exclusions, according to its Web site.
Shares of Amazon rose 37 cents to $18.78 yesterday. They have gained 74 percent this year.