Why Is Amazon Raising Minimum for Free Shipping?

REPLAY VIDEO
Your next video will start in
Pause

Recommended Videos

  • Info

  • Comments

  • VIDEO TEXT

Oct. 23 (Bloomberg) – NYU Stern School of Business Professor of Marketing Scott Galloway discusses shipping costs for Amazon Prime consumers. He speaks with Erik Schatzker on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Change.

I suspect you have some ideas.

I think they want to migrate people or incentivize them to go to amazon prime, which has become a big hit for them.

About a third of the operating profit comes from the customers.

Before we go inside this, what is the risk for amazon?

The risk and benefit.

Strictly look at the shipping.

The tension.

The clinch -- tension that clearly exists.

We have seen tension between amazon and major career companies.

If nobody left, how much might they make by raising the free shipping fee by $10? that is the rightful crumb, are they reducing the advantage?

Will be will order more stuff from ebay or walmart.

Best buy 20 five dollars.

People with a target card has zero shipping.

It you do not think people will balk when they see the $35? amazon does so much testing around analytics around what works,, if they are doing it it works.

If you break down the price for prime customers, and they spent $55 and another $35 on the licensing fees.

Amazon prime customers make $1250 versus $500 for the other 160 million amazon consumers.

So that is a relevant sister stick -- statistic.

The moment you become a prime customer, it your default retailer is amazon.

Let's talk about prime.

We know what it is right now.

Free two-day shipping.

$79 per year, plus you can watch movies free streaming.

A little tricky in some platforms.

You get free book rentals.

What does amazon prime need to become in order to draw in people the way they have been drawn into netflix?

When you think of prime, people think of it as free shipping.

It is membership and the amazon echo system between the kindle and it looks like they will come out with the phone and the content they are trying to aggregate.

This is the entry point that includes a lot of freebies and one of the key things is free shipping.

This kind of reminds me of cosco, which has membership.

The predictable (revenue and consumer behavior is striking.

The moment a person commits to amazon prime, and to become amazon's best customer.

Is there not a risk that creating their own ecosystem puts them in the same position as apple?

People have been criticism -- critical of this.

I think everyone is headed in the same way, whether you log onto cool -- google or chrome.

Everyone is trying to build a garden around you, such that you do more planting in their garden.

Everyone is trying to make sure they capture as much of your wallet and time online as possible.

To one difference is google and apple make a lot of money, and amazon does not.

Does it matter that amazon does not make a lot of money doing this?

They say we're not making money and the stock its bid up.

We talk about the multiple different industries.

There is no multiple excelerator like vision and leadership.

Just a those of being the retailer-- jeff bezos to be the retailer for everybody everywhere, spending another 6.2 billion on fulfillment -- the market has bought into the vision in such a big way that they have extraordinarily no- cost to capital and are able to develop search eject -- strategic things that other companies cannot replicate.

I noticed yesterday apple may not sell the ipads for any less the giving away the operating system upgrade and giving away the associated software that used to cost you a bunch of money.

Especially when you talk about other retailers.

I was talking to a retailer who said they made 70 million in profits off of shipping.

Shipping profit is now gone.

Sucking the oxygen out of the room for any when.

-- anyone.

Look at how much we pay for the cable bill.

Mostly because it is the only choice we have.

They're going to be the type of stuff into america's household.

Great to have you.

Thank you very much.

Scott galloway, the stern school of business in his own firm.

This text has been automatically generated. It may not be 100% accurate.

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change