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On Free Delivery, Can Amazon And Sellers Find A Middle Ground?

By PYMNTS  /  One of the most pervasive yet unspoken truths in the retail world is that, sooner or later, Amazon is going to have to jack up prices for its growing horde of free or nearly-free services. That’s only possible if it can get not just some and not just most but just about all consumers out there hooked on a business model that gets them their goods faster and easier by orders of magnitude more than its nearest competitor.

Even with the benefit of Prime subscriptions, it’s been a profit-starved journey for the eCommerce giant, but if the future of online retail relies on making good promises of free delivery wherever and whenever consumers want it, sellers on Amazon might have just gotten a bitter taste of what’s to come.

According to a report obtained by ECommerceBytes, Amazon sent out a notice to third-party sellers in late March informing them of a new rule: In certain product categories, merchants would be required to offer some kind of free shipping option on a subset of their products by the end of May or risk having their items delisted from the site.

“To help provide customers with the best possible buying experience, Amazon is implementing a new shipping policy in the Shoes, Handbags & Sunglasses category,” the notice forwarded to ECommerceBytes read. “Starting May 24, 2016, a free shipping option will be required for all listings in this category with an item price of $49 or more.”

Two months’ notice isn’t a tremendous amount of forewarning, but it’s not as if an announcement like this would have been welcomed even if it came 12 months out. Predictably, a great many sellers in shoes, handbags and sunglasses — a category that Amazon already strictly regulates to dissuade counterfeiters and used products from grabbing some quick cash — were less than enthused with the decision, and they took to theAmazon Services message boards to vent their frustrations.

“I have never heard of a platform telling you, ‘You can’t charge for shipping.’ This is new.”

“The wording suggests to me that it’s going to become effective by Amazon whether you change your settings or not? Or am I reading it wrongly?”

“Where does it end once Amazon starts requiring how a small business prices their products on this site?”

Despite the justifiable (or not) rants of some sellers, the last question might actually be a valid one. Is this free shipping requirement specific to the experience of selling shoes, handbags and sunglasses, or is it just the first sign of the future cost of doing business on Amazon? Conspiracy theories abound. The seller who originally forwarded the notice to ECommerceBytes doesn’t even sell in the affected category but was sent the announcement anyway. Can that be chalked up to the ever-increasing number of reply-all errors, or is it an administrative mixup that belies a more exhaustive mandatory free shipping policy to come?

Time will tell, but evolving consuming attitudes on delivery preferences can help make an educated guess. A November study from Deloitte found that while shoppers have definitely developed a sweet tooth for free shipping (72 percent prefer it), it’s becoming less and less the case that they require their orders to arrive as fast as humanly (or drone-ly) possible if they have to pay out the nose for the convenience.

In fact, 87 percent would rather order with free shipping than shell out for expedited delivery (13 percent).

It’s the age-old divide — or, at least, it has been since Amazon began hooking Prime shoppers with free two-day delivery and one-day for a fee — between speed as a premium service and speed as the new normal that customers will ostensibly seek elsewhere if not explicitly provided to them. It’s important to note that Amazon didn’t stipulate that sellers must offer free expedited shipping, and if it was Jeff Bezos’ goal to institute a site-wide push toward that direction, one would think that the detail-oriented retail juggernaut would’ve said so.

Signs are beginning to show that the scales are tipping in the direction of free over speed. Dick Metzler, CMO at uShip, told Retail Dive that while no-cost expedited shipping is a nice dream for Amazon, its sellers and its customers, the honeymoon period of eCommerce is wearing thin for all parties involved, and more efficient, sustainable ways of working in this new retail world are starting to make sense.

“With one-hour or two-hour delivery, there’s no opportunity to get route density or efficiency,” Metzler said. “You’re seeing some early signs of people not making it. There’s dead VC money, and you’ve seen some early signs of the chickens coming home to roost.”

Not all newly hatched chicks learn how to fly, though, and while a few of the sellers furious over Amazon’s new shipping policy might not survive the summer of delivery adjustments, it might be time to give them the benefit of the doubt and believe that these decisions might just be for the good of the entire flock.

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