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Amazon Japan seeks to turn fee hike into a lure for loyalty program

Small orders cost more but not for Prime members

Amazon has had to pay more to ship parcels as Japan's online shopping market explodes.

TOKYO -- Amazon Japan seems to be turning a fee hike for small deliveries into an opportunity to prod consumers to join its loyalty program.

The e-commerce heavyweight said Wednesday that orders under 2,000 yen ($18.76) will incur delivery fees of up to 440 yen, up from a flat 350 yen. Rush deliveries will cost up to 540 yen, a 50% increase.

The company will keep membership fees for its Prime program unchanged. The latest hike will largely apply to direct sales, rather than those of third-party sellers using the digital storefront.

The e-tailer's strategy is probably "to further boost Prime membership," said a source in the online retail sector. Members pay 3,900 yen per year or 400 yen per month for access to free same-day delivery and other perks.

Charging more per package would make it easier to recoup the cost of a Prime membership in waived delivery fees, and is seen as likely to prompt more sign-ups. Rivals predict that after getting a taste, members would feel compelled to shop more on Amazon to get their dues' worth.

While Amazon has been able to compete effectively on cost by using its massive inventories, raising delivery fees may make competitors look more appealing for some orders.

The fee structure changes were decided "on a comprehensive basis due to changes in the business environment," Amazon Japan stated. Rising logistics costs are seen as a major factor. Amid the recent explosion in Japan's online shopping market, the e-tailer agreed last year to pay 40% more to courier Yamato Transport, a unit of Yamato Holdings.

Still, the new arrangement may not cover Amazon's greater outlays to Yamato, observers say. In fact, the e-tailer's logistics cost burden could increase as Prime members account for a greater share of purchases. The company said only that it was "investing with a long-term perspective."

Competitors are also raising their delivery prices to pass rising shipping costs on to customers. Seven Net Shopping -- an arm of convenience store operator Seven-Eleven Japan -- will charge a blanket 324 yen a pop rather than delivering purchases of 1,500 yen or more for free, it said on Monday. Free in-store pickup will still be available.

Retail giant Aeon has raised its free delivery price thresholds, which differ by region and other factors, at online supermarkets in certain areas. Some customers face 6,000-yen minimums where they had been 5,000 yen, for instance.

Nevertheless, delivery fees are not completely covering true transport costs, say some retailers and online merchants. "It's become customary to bend over backward to deliver parcels all the way to homes for little or no charge," remarked an official at one retailer.

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