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Free Shipping Is the Key to Amazon's Success

By Daniel B. Kline – Feb 7, 2020 at 9:10AM

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About two-thirds of customers would consider leaving if it went away.

Amazon (AMZN -0.54%) has spent billions of dollars to stay ahead of its competitors when it comes to shipping. At the core of that has been Amazon Prime, a service that costs $119 or $12.99 a month, which offers free two-day, and, in many cases, one-day shipping.

That has been a smart investment as 80% of consumers named "fast and free shipping" as the reason they shop at Amazon, according to a new survey conducted by Delivery Experience Management platform provider Convey.

Without free shipping, however, respondents were fairly overwhelmingly willing to consider shopping elsewhere.

An Amazon Prime tractor trailer.

Amazon has invested billions in delivery. Image source: Amazon.

You pay for free?

Amazon does offer actual free shipping. If you order $25 in qualifying items non-Prime members get free shipping that arrives in 4-5 days. Respondents to this survey, however, appear to be answering questions about the unlimited free shipping that's part of Prime (it's not specifically explained in the methodology but there are questions related to one-day and two-day shipping which are specific to Prime).

A quarter of those surveyed (25%) said they would not use Amazon if they had to pay for Prime and 39% said they were unsure if they would stay with the online giant. That means that 64% of Amazon shoppers would at least consider leaving if the free shipping perk went away.

A new bar

Amazon clearly understands the value of free shipping. It has invested heavily in improving its service to offer one-day and even same-day delivery. Those appear to be wise investments given the value consumers clearly place on shipping.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

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