Wal-Mart pulls knock-out punch, offers free shipping with no minimum purchase.
by Deepak Sharma on Wednesday, November 10, 2010
For years, Wal-Mart has used its clout as the nation’s largest retailer to squeeze competitors with rock-bottom prices in its stores. Now it is trying to throw a holiday knockout punch online.
Starting Thursday, Wal-Mart Stores plans to offer free shipping on its Web site, with no minimum purchase, on almost 60,000 gift items, including many toys and electronics. The offer will run through Dec. 20, when Wal-Mart said it might consider other free-shipping deals.
The move will definitely impact small retailers who with small number of warehouses will not be able to reduce transport costs and will take a hit on their margins if they were to match Wal-Mart’s move.
But given Wal-Mart’s scale and influence in the marketplace, its free pass for shipping sets a new high — or low — in e-commerce. And it may create an expectation among consumers — free shipping, no minimum, always — that would make it harder for smaller e-commerce sites to survive.
For smaller retailers and Web sites, which pay regular mail rates and may ship from only one location, free shipping is not nearly as affordable and often must be added into prices.
“You’re trying to compete with the Amazons and the Zappos, who have so many different warehouses that they can significantly reduce transport costs,” said Gary Schwake, director of business development at the Distribution Management Group, a consulting firm that advises retailers like Eddie Bauer.
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.