Amazon.com hopes for loyalty and long-term revenue
Amazon.com is hoping to build customer loyalty with its new free shipping for a fixed annual fee program, plus it will probably generate significant increase in revenue from the loyal customers buying more items and if some customers who sign up for the shipping program forget about using it, they'll still benefit from the annual fee coming in. According to this NYTimes story (registration required):
Amazon also announced Wednesday that it would begin offering its customers the option of paying a flat annual fee of $79 for unlimited free two-day shipping on orders. The deal also would let customers pay just $3.99 for overnight shipping.
In a letter to customers posted on the retailer's Web site, Chief Executive Jeff Bezos said he expected the new program to be expensive for Amazon.com in the short-term but hoped it would build greater long-term loyalty.
Szkutak noted that the new service is ``perhaps the most expensive thing we've done'' since the company began offering free shipping on purchases of $25 or more.