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Good piece in USA Today about founder and CEO Jeff Bezos, who has confounded Wall Street analysts with his insistence on free shipping programs that they say has drained away the company’s profits. A chief target for the analysts – Amazon Prime, the program that offers unlimited free two-day shipping service for an annual fee of $79.

However, Bezos says – and analysts are beginning to believe – that Prime has become a “lynchpin” in the company’s continued sales growth, encouraging its users to shop more often and buy more products in a greater number of categories.

The numbers don’t lie. USA Today writes: “During the normally sleepy April-to-June quarter, Amazon's sales zoomed 35% higher than the year-earlier period. That came after a 32% first-quarter jump, preceded by a 34% year-over-year spike in last year's fourth quarter — the holiday shopping season.” And while free shipping doesn’t get all the credit – the company also has built an enviably streamlined operation and a network of small merchants and alliances that have served it well – there is a sense that by making customer service the prime directive, Amazon has succeeded whether other web-based retail businesses have failed.
KC's View:
I’ve used Amazon Prime since it was introduced, and I can say without a doubt that it has increased my purchasing frequency – especially during the holidays last year, when I was traveling nonstop and it was a lifesaver.

I also think that it points to something that other retailers are going to have to figure out, because customers are going to demand it – that free shipping/delivery, or least the illusion of free shipping/delivery, will be the cost of getting into the business.