Amazon's Standard Shipping rate for books is actually $3.00 per shipment,
plus $0.99 per individual book. So if you were ordering a single book
from Amazon with Standard Shipping, the total shipping charge would be
$3.00 + $0.99 = $3.99 .
How are shipping costs calculated? We charge a single flat fee
for each shipment, plus additional, smaller fees for each item in
that shipment. The total shipping charge will be displayed on the
last page of the order form, before you submit your order. Here
is the equation we use to calculate the total shipping cost:
(Highest Applicable Per-Shipment Cost) + (Number of Items x
Per-Item Cost) = Total Shipping Fee
Amazon: Domestic Shipping Rates
In practice, many people will pay no extra charge for shipping because
take advantage of the Super Saver Shipping program, which offers free
ground delivery on orders of $25 or more. Another popular shipping
promotion is Amazon Prime, which offers free two-day shipping on all
items for a flat fee of $79 a year.
Amazon: Super Saver Shipping
Amazon: Amazon Prime FAQ
So Amazon does charge very low shipping fees. One reason it can do so
is that it runs its own distribution network, with highly automated
distribution centers located across the United States. In theory,
Amazon's efficient logistics lead to savings, which it can pass on to
customers in the form of low shipping fees and other incentives.
It's the online retailer's fixation with refining the way it
picks, packs and ships items that has enabled it to challenge
one of the largest barriers to e-commerce: shipping fees.
Amazon helped to pioneer the free-shipping concept when it
offered free shipping on orders of $99 or more during the 1999
Jack Nugent sorts boxes ready for shipment. The Nevada center,
Amazon's largest, spans 13 football fields.
The company extended the offer to customers year-round in January
2000 and lowered the threshold to orders of $25 or more later
the same year ? an offer that still stands.
Free shipping, combined with deeply discounted items, became a
powerful incentive for customers to shop at Amazon, helping the
online retailer recharge sales growth.
The Seattle Times: Pick, pack and ship ... and deliver profit
Amazon entrusts the final-mile delivery of shipments to courier services
such as FedEx, which can work closely with Amazon's distribution centers
for large delivery projects such as the release of a new Harry Potter
FedEx integrated its industry-leading tracking information
directly through the Amazon.com Web site to provide a seamless
experience for Amazon.com customers from order to delivery. FedEx
representatives also provided support at each Amazon.com
distribution center to help facilitate any automated-shipping
and package-processing needs.
FedEx: Press Releases: FedEx Ready to Deliver Harry Potter Magic Directly
to Thousands of Amazon.com Customers
In general, however, industry analysts say that Amazon's low-cost shipping
programs are causing it to lose money. The Amazon founder Jeff Bezos and
other Amazon executives defend their low shipping rates on the grounds
that what is good for the customer will, in the long run, be good for the
business. In other words, Amazon hopes to attract such a large customer
base with its shipping promotions that it will eventually make up its
losses through customer loyalty and economies of scale.
Bezos acknowledged that Amazon's new shipping policy will be
expensive in the short run, but could bring in new customers.
"There could be a whole new pool of customers for Amazon if we
can offer a new class of shipping," said Bezos. "Given our cost
improvements, we believe this is a bet worth taking."
CNET: Amazon posts its first net profit
Outbound shipping-related costs totaled rose 20% in the quarter
to $280 million. Net shipping loss expanded 17% to $91 million
because of Amazon Prime and other free shipping orders. This
basically means the transportation element of the business is
subsidizing product sales.
Supply Chain Digest: Logistics Cost Increases Hit Amazon.com Hard
One hope is that reduced prices, both on products and especially
on shipping, will capture new customers and cement the loyalty of
existing ones. Thanks to free-shipping offers such as its Amazon
Prime program, which gives customers free two-day shipping on
most orders for $79 a year, Amazon incurred a shipping loss of
$78 million in the quarter. Moreover, it began offering free
trial memberships in Amazon Prime, which could further hike
shipping losses this year.
BusinessWeek: Amazon's Costly Bells and Whistles
In sum, the reason Amazon can charge such low shipping fees is that it
is willing to lose money in order to attract new customers. Jeff Bezos
sees this as giving "money directly to the customers" rather than to
Look at something like free super saver shipping -- our
free shipping on orders over $25. That is something we very
methodically experimented with for a full year. At first,
orders over $99 would ship free, and then orders over $49
would ship free, and then orders over $25 would ship free. We
knew that customers would like that, so it was a question of,
would it drive enough sales to make it worthwhile? We compared
it with a television advertising campaign: We picked two
markets, Minneapolis and Portland, Oreg., and for a year we did
television advertising just in those markets. We wanted to see
if we would get a sufficient lift in sales to justify television
advertising, and to compare that with giving the money directly
to the customers in the form of free shipping instead of to the
television networks. That's a very customer-experience-focused
experiment, and when we were done we decided we would make the
$25 free shipping indefinite.
Inc: America's 25 Most Fascinating Entrepreneurs: Jeff Bezos
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