Source: Amazon.com
Did Amazon just crush Target and Walmart’s free holiday shipping moves?
Americans do not like having to pay shipping charges, particularly at Christmastime. Now Walmart, Target and Amazon.com are trying to outdo each other in this respect as they seek to entice consumers to get in the holiday shopping mood.
Walmart was the first out of the gate when it announced last month that it was expanding its free two-day shipping on millions of items sold by third-party sellers on its online marketplace. Customers must spend a minimum of $35 on qualified items to get the deal.
Target followed the next day by offering free two-day shipping on hundreds of thousands of items with no minimum purchase required at all.
Now Amazon has announced that it is offering free ground shipping on hundreds of millions of items for the holidays with no minimum purchase or Prime subscription required. Prime members will still be able to get free same-day, next-day or two-day delivery on qualifying products.
So with all the various offers to choose from, which ones are Americans likely to choose? Results from Deloitte’s 33rd annual “Holiday Survey” may shed some light. It found:
- Convenience (77 percent) and free shipping (72 percent) are the top two reasons that consumers shop online;
- Sixty-one percent plan to buy products online that qualify for free shipping;
- Eighty-eight percent prefer free shipping over fast shipping (two days);
- Sixty-six percent are willing to wait three to seven days to receive their orders if shipped free;
- Forty-seven percent shop in stores to avoid having to pay for shipping costs.
- Amazon Expands Free Shipping to Everyone for the Holiday Season – Amazon.com
- Did Target just become the easiest place to shop for Christmas? – RetailWire
- Will free two-day shipping from third-parties give Walmart an edge for the holidays? – RetailWire
- Deloitte Study: Holiday Shoppers Hooked on Fast and Free Shipping – Deloitte/PRNewswire
Discussion Questions
DISCUSSION QUESTIONS: Will Amazon’s free shipping with no minimum purchase offer mitigate any disadvantage it may have had in its competition with Target and Walmart for the holidays? Which of the three retailers – Amazon, Target and Walmart – do you think is poised to make the biggest online market share gains this holiday season?
Poll
BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Tony Orlando
Owner, Tony O's Supermarket and Catering
I think it’s going to be a horse race, really, and I wouldn’t bet against either Walmart or Target. They’re not rolling over, and they’re going to actually make money at it too. That much I can predict.
I do wonder what Amazon will do with it’s third-party Prime shippers. I guess either they take a hit or they can’t play. That won’t go down well on the retailer side.
I don’t see this making much of a difference because ultimately the customer will still receive free shipping. The only slight disadvantage is Walmart requiring a minimum of $35, but most shoppers will exceed that amount. The free shipping will not be a game changer for these companies however it is costly to all three of them and will dip into their margins. Retailers are going out of their way to be the first and fastest with delivery. For Walmart and Target, the more significant disadvantage is it keeps customers out of their stores. Yes, we need to compete with Amazon and other e-commerce retailers, but programs like BOPIS with an incentive for the customer who chooses that option would be an opportunity for brick-and-mortar that Amazon can’t match.
Sigh. It appears the Shipping Wars will continue to erode margins for the foreseeable future. Sure, this move by Amazon will restore competitive parity for this holiday season. Sure, shoppers will respond. And sure, Q4 results will reflect the gains. But what about the long term? How many millions of unprofitable orders — or at minimum, orders where margins are compromised by shipping expenses — will these three giants process this year in the name of short-term parity? Every single one of those millions will once again reinforce the expectations with those shoppers that shipping should be free. And while the fourth quarter will fade quickly, those margin-eating expectations will last … and last … and last. Sigh.
Maybe more of the same, but it’s these market forces that will transform what shipping looks like. Everything from automated delivery to 3-D printing of products is looking at the costs here and looking to take a step into that space. This might be a short-term loss for retailers, but it’s demanding a new paradigm in the not too distant future.
Great point, Sterling — well said, and I agree 100%.
All other things being equal, the most powerful four-letter word with consumers is FREE. However, as the survey indicates, convenience actually ranks slightly higher than free shipping. Convenience can mean a lot of things — like delivering at a specific time or a specific location (e.g. a locker). “Free” can be very costly if your holiday gift is delivered at times when easily stolen by “porch pirates.” Bottom line, free shipping for items under $35 might win Amazon some Walmart sales, but the holiday season will be won on larger items in stock, delivered on time, with tracking every step of the way.
Gosh, what a surprise — Amazon offering free shipping. Shocker! Target and Walmart thought they could gain an advantage by using the word “free”? This is pure race-to-the-bottom stuff, and unfortunately a tactic easily matched. So now that it’s a level playing field on shipping, they all have to competing the old fashioned way — product, service, convenience. Did I mention product? I can’t wait to see who will first offer a savings coupon IN ADDITION to the free shipping for the privilege of possibly losing money on an e-commerce order.
Every other word in Target’s new ads is “free” and that has to have an impact. The question here is what wins — free shipping, or free-after-spending-over-$100-for-Prime shipping?
Amazon has a clear advantage over Walmart and Target in terms of holiday based on the free shipping and breadth of assortment. Convenience plus free shipping are key as noted in the survey. However, add to this that much of holiday product is purchased for others so the wait time of free shipping becomes even less important (until we get closer to the holiday). Let’s hope they don’t alienate their Prime members with this move which may be a larger concern.
Oh boy! Here we go! It’s amazing how competition can benefit the consumer. Anybody that doesn’t have an Amazon Prime membership will now have the benefit of free shipping without having to pay $120/year. Important to note this is standard ground shipping, but who really cares. It’s still free shipping, meaning the customer doesn’t have to leave the home or office. Walmart’s aggressive move to grab market share with free shipping for orders over $35 was trumped by Target’s free shipping with no minimum. And Amazon took notice and, not be outdone, matched the best offer. While I can’t predict who will gain market share between these three retailers, I can predict a winner — and that’s the customer.
Free shipping is a primary discount offered during holidays. Nothing has changed. This just narrows the field down to execution. Walmart still has the broadest logistical network and stores to match. Amazon has expanded their logistics. Target has done the same. Free shipping has always been a staple of the holiday season — and you can add to that Free Shipping Day coming up on December 14th this year across over 1000 retailers.
Shipping is one the key battlegrounds this holiday season and Amazon has just fired off some more shots. Given the extent of the various offers, no one player has a clear competitive advantage. It will be interesting to see how margins have been affected come the new year!
Advantage Amazon. As of April of this year, there are over 100 million Amazon Prime subscribers. Amazon has something neither Walmart nor Target has. Customer loyalty built over the years. Amazon is the most convenient, fastest shippers and most trusted for e-commerce shopping.
Walmart and Target may have to actually hunker down and think about creating a unique advantage rather than just attempting copycat moves.
This is a competition where each participant will try to continually outmaneuver each other to gain a commercial advantage. As the battle rages on, the consumer will benefit. I believe Target will make the biggest online market share gains over this particular holiday season. There is a lot of chatter here in Minneapolis and Target is making observable improvements in the active participation of store employees with shoppers. I went into a Target yesterday and noted that I have never seen as many cash wraps open at this Target — ever! Are they actually paying attention to shoppers!?
I’m certain UPS, USPS, and FedEx are all thrilled beneficiaries of the battle! If the USPS can’t get it together during this revolution they have no business being supported by taxpayer dollars — it’s all about mismanagement!
Deloitte’s study seems to make a very compelling case for free delivery. This entire issue with these giants is becoming like scoring a boxing match. Who wins this fight? I think, because this is only round four, we have a longer time to determine the winner. And market share growth over last year? I’m thinking Walmart or Target by a punch or two.
Amazon have had to react to Walmart and Target as free delivery is such an important driver to online shopping. However, where does this leave Prime customers who are currently paying for this privilege? I know Amazon says they will still have the opportunity to get same-day, next-day or two-day delivery but that does not seem to be the main driver.
Retailers are beginning to get to Amazon and this is going to become a battle of the strongest and who can withstand the additional cost of this the longest. It is unlikely that they will all drop this after Christmas if they feel it offers a major advantage, Free shipping represents a high cost so only the big players will be able to sustain this.
“Free shipping is one of the easiest promotions to execute for a retailer and is certainly popular among consumers, however, it is a very costly initiative to undertake,” Moody’s lead retail analyst Charlie O’Shea, wrote in an email in RetailWire. “…Amazon’s patient and seemingly profit-agnostic shareholder base provides the company with the flexibility to offer this type of costly promotion, which is a unique competitive advantage.”
It is bothersome that retailers are continuing the silliness of offering a premium service (shopping online) but believe they must do so at a discounted price. The race to the bottom seems to have no end.
Who will get the biggest online market share? Amazon, obviously, because of the over-sized share they have of online shopping. But let’s remember that the evidence is they’ve never made any profit from their retail-like selling.
This is a horse race that Amazon should win. Customers will win across the board and Amazon, Target and Walmart’s margins will shrink. When it comes to price wars, unless you have a sustainable cost advantage, avoid engaging in same. Both Amazon and Walmart may be in the best position to slug it out. Not so sanguine about Target.
The Big Three (Amazon, Walmart and Target) are all making bold moves to lure shoppers and they are influencing customers’ expectations that will persist past the holiday season. Once consumers get a taste of free shipping on more items, their expectations will continue to rise.
While all three are offering great shipping deals, Amazon will continue to be the clear winner. Why? Because more than 50 percent of consumers start their online shopping search on Amazon and it is more convenient to buy it there than switch to another website to make their purchase.
I said a couple of weeks ago that this would happen, and Amazon is the 800-pound gorilla online. No one wins, except of course Amazon, and the losers will continue to be small merchants who do not have the capital to lose big time money trying to ship stuff for free. We have conditioned consumers to expect free shipping, which is very expensive to do, and unless The Big Three build it into the price of goods the purchases could end up being a net loss to them. Consumers will pit one against the other for who has the lowest price, and again it is a win-win for the consumer. Tons of fun to be in retail today, isn’t it?
Shipping should be free! I’ve always felt that way. Only in the age of the Internet do we show shipping and talk about it so much. Oh, poor retailer! Do we think the customer cares? In the past, shipping has always been built into the cost — across the board — which helps it even out on smaller items. That needs to continue. Will it affect margin? Sure, but that’s a merchant’s job to figure out with innovative new product where margin makes up for shipping.
Give the people what they expect: Free Shipping and stop using it as a marketing ploy.
Target and Walmart continue to try to erode Amazon’s market share, forcing Amazon to react with its own shipping promotion. Amazon’s new free shipping promo is aimed at non-Prime (i.e. less loyal) customers who will likely go where they can get the best deals, and keeps them in competition for their business. Amazon will still see large gains this holiday, as their Prime membership has continued to grow this year and those loyal shoppers will head to Amazon first before checking out other online marketplaces.
The race has begun. There was no doubt in my mind that once Walmart made its “free shipping” announcement, both Target and Amazon would join in. Why not? They are all going to follow the lead of whoever is first to enter whatever it is they are going after.
My guess is all three will win when it gets down to sales and profit. They will all have a great holiday selling season. But guess what, we can also be winners if we get in on the free shipping plus what they come up with next. All we have to do is go to the door and collect the packages when the bell chimes.
Free shipping is important, but so is merchandising availability and trust that the product will arrive on time. What I am curious about is the last mile logistics this Xmas and retailers making promises that shippers like UPS, USPS and FedEx need to keep. All the free shipping could turn into bad publicity if the presents don’t make it for Xmas.
Whatever internet access device you are relying on, Amazon is at your fingertips all day, every day. If “king Jeff The Crusher” can get the message onto the access icons, Amazon will do well against the self proclaimed competition.
I doubt if this will make Prime customers very happy. This attempt to give holiday sales a competitive shot in the arm might just hit the foot instead. No tax and free shipping is going to kill a big time price seller sooner or latter.
It’s likely that Amazon has done this in a two-prong attack; the first is to make sure customers don’t have a reason to go anywhere else (like free shipping) and the second is to try and attract new Prime subscribers by letting them experience the benefits first. Whereas Target and Walmart’s strategies both seem just about this holiday season, rather than anything beyond that. In this respect, Amazon may be the winner, but ultimately whoever they shop with most customers are going to win when it comes to free shipping, which is probably all they care about (more than who they are shopping with!)
I’m looking forward to seeing how Walmart’s newly acquired online brands drive sales and cross-selling throughout the holiday season!