The joke we had when I worked at American Airlines is that it’s amazing how much money someone will pay for a free ticket. They’ll even fly unnecessary segments at the end of the year just to keep their premium status or buy a significantly more expensive item for the miles.
Enter Amazon.com’s Prime program. For $90 a year, I’ve been able to ship almost anything 2-day shipping for free and next day for $4. I’ve probably spent $50k over the last year on books, electronics, toiletries, and food. Today, I ordered dental floss and a pair of swim goggles. Yes- on Amazon.com. And, yes– because of free shipping and the convenience of having it delivered to my door. Of course, I did have to buy a 12-pack of dental floss, which will last me for the next 3 years, but I DID get a good deal on it. And certainly, the FedEx and UPS delivery guys are probably not the happiest for having to cart stuff to me each day.
On a flight from London to Denver a week ago, I got into a conversation with the fellow who runs Amazon’s call centers in Ireland. On a 10-hour flight, interesting things can happen. Besides the fact that they have an insane staffing issue during the week of December, we discussed how free shipping had boosted Amazon’s sales in recent years. I remarked how much Amazon had probably lost on me because I would use Prime shipping to ship 24 packs of soda next day air for just $4– or order a $7 book, just because. Not only have I ordered hundreds of items, but I’ve invited 4 other users to share my free shipping account (you just have to exchange birthdays to be able to verify). I estimated that Amazon lost thousands on me.
This fellow disagreed. “How many friends have you told about Amazon.com and how much had that positive marketing been worth, using me as an evangelist (kind of like what I’m doing right now, in fact)?” My counter to that was, “What if I had a program where I sold $10 bills for only $8– how popular would that be?” His view was that free shipping can really be thought of as an advertising expense. Instead of spending millions on TV commercials, why not just give that money back to consumers in the form of free shipping? I have to admit that he got me there.
We have a couple of clients that have shopping carts, selling things like equine nutritional supplements online. We’re going to shamelessly copy some of the things that Amazon does– free shipping, product reviews, loyalty programs, address book, and so forth. In fact, does anyone know of a shopping cart that approximates Amazon? We are using Magento.