By Nandita Bose
CHICAGO -- Amazon.com (AMZN) said Thursday it will offer limited free same-day delivery under its Prime shipping service as retailers try to outdo each other on delivery deals, and expanded the service to San Diego and the Tampa Bay Area.
Amazon offers same-day delivery to Prime members for $5.99 an order and non-members for $8.99, plus 99 cents a unit. The online retailer will allow Prime members free same-day shipping on orders over $35, Greg Greeley, head of Prime, told Reuters.
%VIRTUAL-pullquote-We know same-day delivery volumes will grow dramatically now that we are making it free.%"We know same-day delivery volumes will grow dramatically now that we are making it free," he said.
Amazon's announcement comes within days of rival Walmart Stores (WMT) saying it plans to test a new unlimited online shipping service this summer for $50 a year, a move that may hurt Amazon, which has an annual $99 Prime shipping service.
Google (GOOG) also recently launched its Express shopping option that allows retailers that do not have same-day delivery capabilities, to use its network in certain markets. Google Express costs $10 a month, or $95 a year.
Amazon launched Prime a decade ago offering free, two-day shipping -- at first charging $79, then raising the service to $99 last year. In 2009 Prime launched same-day delivery and last year started a one-hour delivery service, Prime Now.
Prime has become the cornerstone of Amazon's growth -- and a testing ground for new services ranging from television programs and movies to delivery-by-drone.
In 2014, Amazon spent billions of dollars on Prime shipping and has invested $1.3 billion in its Prime video service.
Earlier this year Amazon said U.S. Prime membership increased 50 percent in 2014. In December, it said customers ordered more than 10 times as many items via same-day delivery this holiday season, compared to a year earlier.
The same-day delivery service is already available in cities such as New York, Philadelphia, the San Francisco Bay area, Seattle, Atlanta, Boston and Baltimore, among others.
A recent study of 1,400 online shoppers by Walker Sands Communications found that free shipping was the feature most likely to get people to shop online, followed by free returns and one-day shipping. The study also found nearly 96 percent of respondents had made a purchase from Amazon in the past year.
By Nandita Bose