When it comes to free shipping, some of today’s top retailers are fighting for the number one spot.
Consumers are increasing their online spend, expecting the quickest delivery speeds and the lowest costs. It’s all about the customer experience and delivery has to be fast).
The challenge for retailers is how to offer this perk without taking too big a hit while doing so. Today, there are four large retailers making notable plays in the shipping war, each in their own unique way.
Amazon recently lowered its minimum order size for free shipping from $35 to $25. But, customers will have to wait five to eight business days to receive their order. By today’s standards, that’s slow. However, Amazon’s two-hour delivery is already available to Prime members in some limited markets. By taking advantage of Amazon’s Prime program, customers can access free, two-day shipping and even sometimes Sunday delivery. The Prime program also includes more than 50 million eligible items for its service. According to Consumer Intelligence Research Partners, an estimated 65 million Prime members in the U.S. spend “on average about $1,200 a year, compared with about $600 per year for non-member customers.”
Target’s shipping offerings are a little different. To get free shipping, customers must spend a minimum of $35 and also wait three to five business days to get their orders. However, anyone who uses Target’s REDcard debit or credit card for online orders gets free standard shipping. So if you’re looking to get your order quickly while not paying a dime for shipping, you’re out of luck. However, Target has been testing one-day delivery on what it calls “essentials” for an as yet unnamed fee.
When customers spend $35 or more at Best Buy, they will receive free shipping but their order could arrive in either two days or via standard shipping. Thousands of items site-wide qualify for free 2-day shipping, each of those marked with a “Free 2-Day Shipping” badge. Best Buy also has three member tiers: “My Best Buy”, “My Best Buy Elite” and “My Best Buy Elite Plus”. My Best Buy offers free-two day shipping on thousands of items with a $35 minimum purchase, My Best Buy Elite offers the same plus no minimum purchase and free scheduled delivery, while My Best Buy Elite enhances the same perks for holiday shipping. To become a member of the top two tiers, you must spend over $1500 in purchases per calendar year. The more you spend, the more shipping perks.
Wal-Mart may have the best shipping perk of all four. While customers will have to spend $35 to receive free shipping, orders will arrive within 2 days (a perk that Amazon Prime members have to pay for). If your order doesn’t quite meet the $35 requirement, you can “upgrade” to free two-day shipping for just $5.99. However, eligible items are limited as Wal-Mart only offers around two million (48 million less than Amazon). Additionally, Wal-Mart is testing a new type of delivery to lessen the blow of shipping costs. Instead of carriers, they’re using their own employees to deliver packages on their way home, an innovative last-mile delivery technique. Will it work? Time will tell.
Free Shipping comes at a steep cost: Rising shipping expenditures are eating away at retailers’ margins. Larger retailers that can better afford to eat the cost of free shipping are battling to gain an advantage over Amazon. But most retailers, particularly small ones, lack the tools necessary to compete in today’s shipping wars.
Not all retailers have effective tools for managing shipping rates and they pass all (or part) of the shipping cost to customers. However, many times this isn’t necessary. With the right tools, retailers can take advantage of rate shopping for shipping services, including ground service with next-day delivery at a much lower cost.
For instance, shipping software provides automated rate shopping from a company’s negotiated rates with major carriers worldwide. The result? The best shipping option for every order. Shipping software can even archive a shipment history for both retailers and customers and provide predictive shipping analytics to monitor shipping costs and operations.
Don’t fall behind in today’s shipping war. Onboard an ally like shipping software, and be the hero.