Amazon is growing on-demand services after reporting a 20% sales increase in 2015.
The consumer electronics retailer has launched a membership program for customers to receive free, three-day shipping for select items, plus other perks, for $49.99 per year. Amazon Prime members receive free, two-day shipping on many items for $79 annually.
Newegg Inc., known for its consumer electronics assortment, is making a bet on customer loyalty.
The online retailer this week launched Newegg Premier, a membership program that guarantees free expedited shipping in three days or less for $49.99 per year. Members also receive free returns, no restocking fees, access to exclusive deals, early-bird sales notifications and a dedicated customer service phone line, the retailer says.
Within the first two days of the program’s launch, “thousands” of consumers enrolled in the program, says Soren Mills, chief marketing officer for Newegg North America. “This is great validation of the pent-up demand for a Newegg customer benefit program, and we’re pleased with the program’s traction thus far.”
The expedited shipping option is available on select items in Newegg’s catalog marked with a Premier icon (a yellow “P” in a gray box that appears next to the price), Mills says. The retailer is still putting together a list of deals for Premier members and hasn’t yet determined the frequency with which it will offer them, he says. Newegg did not specify how many items are eligible for the shipping program. This week, though, about half the items on the first page of “point & shoot cameras” had the icon. Other products also displayed the icon.
Premier competes with Amazon.com Inc.’s Prime membership program, though Mills says it is not a direct response to the world’s largest web retailer’s more than 8-year-old program. “A February 2014 roll-out for Newegg Premier has been on our road map since early last year, so it's not a direct response to Amazon Prime,” he says.
Prime costs $79 per year and guarantees free, two-day shipping on many items in the retailer’s expansive catalogue. Prime, which has roughly 20 million members, according to industry estimates, also provides free access to streaming videos from Amazon’s Instant Video library and Kindle e-books.
Newegg is perhaps at the tip of a larger trend in which all retailers will begin to offer annual membership programs with free shipping perks to compete with Amazon Prime, says Lauren Freedman, president of e-commerce consultancy The E-tailing Group Inc. Eventually, however, consumers will reach a limit and have to decide between loyalty programs, perhaps based on factors beyond free shipping, she says. “Many retailers will jump on the Prime bandwagon, but there are only so many that consumers can join,” she says.
“It’s hard to compare Newegg’s product assortment with Amazon’s—Amazon’s is way bigger,” says Paula Rosenblum, managing partner at research and advisory firm RSR Research LLC. “So far what [Newegg has] accomplished with the offering is to make me aware that they sell other things besides electronics.”
Rosenblum adds that she doesn’t think Newegg has the credibility among consumers to take business away from Amazon. “I suppose for a particular demographic it’s useful, but I don’t think the company’s prices are compelling enough to drive consumers to switch allegiance,” she says. “Plus, a lot of their stuff is high-priced enough that you expect free shipping with it anyway.”
Newegg is No. 14 in the Internet Retailer 2013 Top 500 Guide. Amazon is No. 1.