Starting Thursday, Walmart.com will offer free-shipping with no minimum purchase to ramp up sales during the holiday shopping frenzy. It's a terrifying move for the behemoth's biggest competitors (Target, Amazon.com, Best Buy), even as they try out their own variable shipping pricing schemes to stave off Wal-Mart's advance. The strategy is also designed to out-maneuver e-commerce sites, which don't have the capacity to lower transportation costs from the array of warehouses that Sam Walton's juggernaut can tap. For even smaller online and brick-and-mortar mom and pop stores, it may be a "holiday knockout punch." Still, for the savvy online consumer, there are some potential upsides.
- This Could Create The Expectation of Free Shipping in Every Case The free-shipping offer could be tantalizing for consumers, but it may also predispose them to expecting all of their online purchases to come with a similar shipping price tag (read: zero). The New York Times' Stephanie Clifford and Claire Cain Miller illustrate this potential trend. "Retailers say that shoppers have already started to revolt against shipping fees. While consumers are sensitive to what an item costs online, shipping costs can have even more influence, according to market research," they report. "When e-commerce took off a decade ago, free shipping was a rare perk. Now, 55 percent of consumers are at least somewhat likely to abandon their purchase if they do not get free shipping, according to comScore, the online-research firm, and about 41 percent of transactions online now include free shipping (usually with a minimum purchase)."
- As Usual, Mom and Pop Stores Are the Ones Who Get Clubbed For the "extremely wary" online shoppers, this could be a good announcement, but Daily Finance's Alex Salkever notes that smaller stores will be squeezed out: "The move could set off a holiday free-shipping war as the already heated competition for online shoppers heads toward a frenzied Black Friday shopping season crescendo. The trend of free shipping also could accelerate the shift to online shopping for higher-touch goods, which already has hurt mom-and-pop merchants more than anyone else."
- How Small Retailers Are Fighting Back Despite the pervasive notion that mom and pop stores (both brick-and-mortar and online) will be outmaneuvered by the retailing behemoth, there still may be hope in a potential alliance. The Wall Street Journal's Kevin Kingsbury reports that "last month, several dozen U.S. retailers said they are banding together to take on Amazon by striking at one of online shoppers' biggest concerns: shipping costs. Under a cooperative program called ShopRunner, the retailers are mimicking Amazon by dangling a $79 loyalty program that offers unlimited two-day shipping."
- In Effect, Wal-Mart Has Declared Digital War on Retailers 24/7 Wall Street's Douglas A. McIntyre argues that the gambit may be most successful in bleeding its rivals like Best Buy, Amazon and Target. "Walmart may be taking the old gamble that it can lose money on every sale and make it up on volume," he figures. "Although that is impossible, Walmart stands to gain a great deal compared to its rivals, even if it ultimately pushes its US online operations into the red. Retail holiday sales in America are expected to be anemic for the third year. Walmart can make a land grab online, masked by its $400 billion in global revenue. Its rivals are small enough so that they do not have that advantage. Companies such as Best Buy could lose both margin and sales particularly if they move into the 'free shipping' business on their own."
- There Is a Silver-Lining Portfolio's Kent Bernhard Jr. notes one positive development for those observers not particularly pleased that Wal-Mart is winning the battle to completely dominate the retail landscape. "All that means the smaller players will have to do what others have done in the brick-and-mortar world—compete on service or wring more efficiency from their operations, or both," he writes. "From their perspective, there’s one saving grace. At least Wal-Mart's play is just for the holidays—for now."