February 15-28, 2005 Edition

Amazon Boldly Moves

to Offer Cheap

Two-day Shipping

02/04/05—Amazon has launched its new Amazon Prime membership program, which offers unlimited two-day shipping on all orders on all in-stock products. Members can have orders shipped overnight for $3.99 per item.

Both Amazon and have traditionally offered free shipping on orders in excess of $25, but this is the first time two-day shipping service has been offered at such a low rate.

Amazon founder Jef Bezos, in a conference call last week with analysts, said its the most costly move Amazon has understand in several years, but said he expects it to drive more business to the site.

Amazon, which had a sales increase at its North america media unit of 14 percent in 2004 to $2.6 billion, lost $197 million on shipping during that same year, and expects the shipping losses to grow in 2005, while hopefully attracting more sales. Company-wide sales grew about 30 percent, but analysists are concerned about expenditures and their effects on profitability.

Paralleling analyst unhappiness is publisher frustration over the way the e-retailer posts revised editions on its site. According to publishers, because Amazon uses a system where the first book customers see is the one with the highest sales, old editions of books tend to come up in searches above newer editions. An Amazon spokesperson wouldn’t confirm how search results are conducted but acknowledged that the company is aware of the problem and has taken steps to fix it. More in next week’s magazine.