That is, they'd much rather pay $20 total with free delivery, than, for example, $15 for the goods + $3 for delivery.
It's amazing the number of non-Amazon online shops who still don't seem to know this.
It's more simple than that: most people, me included, hate to see the price change just before you press the ordering button, just because shipping fees were not included. What Amazon does well is that it tells you exactly how much you will be billed from the get go (even when you have to pay for shipping, it's not hidden.)
I've seen cart abandonment drop by 50% or more simply by including shipping price and policies on the pricing page.
People will spend $20 extra to hit the $50 minimum free shipping threshold than spend $5 on shipping for a $30 order.
(Keeping low cost, high utility items in stock and available near checkout is highly recommended. For one fashion retailer, showing a bunch of socks and undergarments under 'recommendations' for orders below the free shipping threshold dramatically increased conversion rate. Everyone needs extra socks. If you've bought a $45 pair of jeans, adding a $5 pair of socks to hit the free shipping limit is "rational" for most people)
To be fair I assume that some number of people never start shopping because they don't like the shipping policies.
That said, people have gotten conditioned with a lot of "free" shipping or free shipping over a certain amount. So when they hit final checkout and are presented with what seems to be expensive shipping, they'll often almost reflexively close the page.
>People will spend $20 extra to hit the $50 minimum free shipping threshold than spend $5 on shipping for a $30 order.
Raises hand :-) I think the shipping charge feels like throwing money away. Whereas adding the item feels like "Surely I can find some item I want at effectively a 25% discount." But, yeah, most of this isn't economically rational. It was all very eye-opening when I was first exposed to this sort of thing 30 years ago and it's been useful in a lot of contexts.
I could buy a few items from non-Prime sellers with free shipping, but then I'm going to get a bunch of different boxes spread out over a few days due to different sellers and shipping speeds. If I pay a little extra per item I know that Amazon will ship my stuff quickly and it usually comes in a single package, unless the items in my order are unusually different from each other.
It comes down to paying for the convenience of not having to "worry" about the shipping costs.
Personal example: To get to (and from) my boat during boating season I use a launch service. I can pay for the season up front, or I can pay by the ride. The season ticket gives me, let's say, 30 round-trip rides to and from my boat. 30 boat rides is a lot more that the average person actually uses the boat in a normal season.
So at the beginning of the season I can do the math (vacation, work schedule, and so on) about likely usage, then make a decision. If I think I'm going to get out 20 times, I can just say "to heck with it" and get the pass. I'm paying for the convenience of, say, not having to go to the bank every few weeks and get a bunch of bills for the ride. This is a fee I pay for that convenience, and I may end up breaking even after all, and what-not.
But when you buy that item on Amazon you don't have that situation. You're not changing your payment structure- there's no inconvenience if you pay the shipping then or up front (if you had to re-enter your cc for a separate shipping payment you could argue it was one of convenience). You're simply going through the exact same steps as before and spending less money.
Now, if you are arguing that the analysis is up front with your Amazon Prime membership payment at the beginning of the year (like my boating analysis)- estimating your likely shipping charges, then going with Prime if it looks close, then I would agree with you.
But I agree with the original argument-that the convenience of paying more for not having to worry about shipping costs is an irrational behavior, as an economist would define it, one based on emotion rather than an economic analysis.