Amazon Raises Free-Shipping Minimum to $35; eBay to Expand Same-Day Delivery

October 23, 2013 Leave a comment

Amazon Raises Free-Shipping Minimum to $35; eBay to Expand Same-Day Delivery

Online Retailers Shake Up Strategies Ahead of Holiday Season

GREG BENSINGER

Oct. 22, 2013 7:34 p.m. ET

Online retailers are shaking up their delivery offerings on the eve of the holiday shopping season. EBay Inc. EBAY -0.21% ramped up its rivalry with Amazon.com Inc. AMZN +1.87% over same-day delivery with an acquisition and plans to reach 25 markets by next year. Meanwhile, Amazon raised the minimum order size required for most U.S. customers to qualify for free shipping.EBay said it is buying Shutl Inc. for an undisclosed sum, and would extend its eBay Now delivery service to Chicago, London, Dallas and other cities. Until Tuesday, eBay offered same-day delivery in parts of New York City and the San Francisco area.

Same-day delivery has become an important battleground for retailers. Wal-Mart Stores Inc. WMT +1.56% and Google Inc. recently joined the fray, seeking to offer consumers near-instant gratification for their online orders and spare them trips to stores.

EBay typically charges $5 to dispatch couriers to area stores to buy merchandise and bring it to users, typically within an hour. Executives say the service isn’t meant to be a profit maker.

“We don’t want to lose money at it,” said Devin Wenig, head of eBay’s marketplace unit. “It would be nice to ultimately make a little money.”

Amazon has been building a network of warehouses near urban centers that it could use as a base for same-day deliveries. It offers the service in 11 U.S. cities, including San Bernardino, Calif., where it recently opened a new distribution center.

Wal-Mart has been testing a same-day service since last year in several cities in which it delivers goods from its stores. Google, like eBay, sends couriers to stores to retrieve items for its Shopping Express service.

Early efforts at same-day delivery from Internet companies failed a decade ago, largely because of overly aggressive expansion schedules. A new crop of startups has since emerged, including Postmates Inc. and Instacart Inc., for groceries.

Mr. Wenig said eBay hopes the delivery service will bring in new users and broaden eBay’s ability to help users buy whatever they want. Unlike eBay’s Now service, Shutl relies on third-party couriers.

EBay Chief Executive John Donahoe said last week he wants eBay Now to connect sellers and buyers within the same city for same-day delivery. So a buyer needing a used lamp within an hour or so could have it picked up from an area seller’s home and brought to his home by eBay.

Amazon’s increase in the minimum purchase for free delivery seemed tied to an effort to push users to sign up for Amazon Prime, which offers two-day delivery for $79 a year. It raised the minimum to $35, from $25; Amazon said it was the first such change in over a decade. An Amazon spokesman declined additional comment.

Even at $35, Amazon’s threshold for free shipping is lower than several important rivals. Wal-Mart last week announced free shipping on online orders of $50 or more. Previously Wal-Mart had offered free shipping on select items or for individual promotions.

Target Corp. TGT +0.65% offers free shipping for orders of any size placed on Target.com that are paid for using the retailers store-branded credit or debit card. Otherwise, shoppers need to spend $50 on eligible items for free shipping.

Bookseller Barnes & Noble Inc. BKS +1.68% offers free shipping to customers who spend $25 or more. A spokesman declined to comment.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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