POLL: Will Target's New Free Shipping Pull Customers From Amazon?
Great news for Target fans: the retailer is offering free shipping on orders of $25 or more, half its previous $50 minimum. That's $10 under Amazon's minimum for non-Prime members, and both services purport to offer 3 to 5 day shipping times.
Taking on Amazon at its Own Game
It's likely Target had those competitors in mind when making this move, especially Amazon, which is by far the leader in online sales. That site does more business than its next several competitors combined. Previous large-scale efforts to outshine Amazon's cheap shipping have offered less clear-cut advantages. Target's same-day in-store pickup can offer a speed advantage over ordering from Amazon, but it comes at the cost of convenience; and at least one study found that in-store pickup sometimes isn't even faster than just shopping in-store.
But over the holiday season, Target offered free shipping with no minimum, and found clear success with the strategy. The Consumerist said that Target saw a 40% sales increase during the fourth quarter, likely due in large part to the offer. The success of that experiment was likely what encouraged Target to slash its minimum shipping prices long-term, a bold but risky move.
Offer Great for Household Items, But Limited Too
It's important to note, however, that the same restrictions apply to Target's new minimum as to the old one. Additional "oversize" shipping fees still apply to some large or heavy items (such as certain furniture pieces), and it's only free to the contiguous 48 states — Alaska and Hawaii are still out of luck, as are Canadians.
Interestingly, the move makes Target a much more attractive source for many small grocery items, like detergent and shampoo. Although some are available for in-store pickup only, many others are available to web shoppers, and it can be tough to find elsewhere without steep shipping fees or large minimum orders. Walmart, for example, has a $50 minimum. Amazon has a $35 minimum which customers can often dodge by ordering via Subscribe & Save, but they then wait up to a month for their order to arrive. (You could have a LOT of dirty dishes by then.)
Big Costs and Risk in Popular Perk
Free shipping does attract customers; Reuters estimated that 68% of online purchases made during the third quarter of 2014 boasted free shipping. However, this perk is costly to the retailer. In that same article, Reuters also cited estimates from Forrester Research suggesting that even with its large and efficient supply chain, Amazon may lose as much as $2 billion a year in offering the service. Retailers are actually likely to raise free shipping minimums in the near future, and offer more incentives for customers to take slower shipping.
It's not hard to imagine that offering free shipping often cuts heavily into profit margins for companies with less robust shipping infrastructure. While Target's lower minimums will likely attract more customers, it's hard to tell at this point if the plan will pay off for the company.
Fortunately, it's easier to tell if it will pay off for you. Just compare the prices, or check DealNews to see if we've done it for you. And keep your eyes peeled — it wouldn't be a surprise if Target's lower minimums spur other big names to match or beat their offer.
Does this move make you more likely to shop at Target?Answer our survey, and let us know more in the comments below.
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