Holiday Retail Madness: Who Will Pay for 'Free' Shipping?
Tom Racciatti weighs in on free shipping this holiday season
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Date : December 22, 2014

There was a time, not too long ago, when retail industry analysts were predicting that online merchandisers would soon stop offering free shipping on orders. How wrong they were.

The trend has clearly gone in the opposite direction. Today, free shipping appears to be the price of admission for many e-tailers. Granted, Amazon.com has begun to monetize its expedited delivery option with a $99 annual fee for its Amazon Prime service, which qualifies members for “free” two-day shipping on many orders. The online giant also offers outright free shipping on orders of more than $35. Other online sellers, especially those with brick-and-mortar stores, are matching Amazon under certain conditions, usually tied to the value of the order. They include Nordstrom, Inc., Best Buy Co. Inc., Barnes & Noble, Dick’s Sporting Goods and Old Navy.

Most recently, Target Corp. has thrown its hat into the free-shipping ring, offering the perk for all holiday orders. The announcement came just a few weeks before the beginning of the Christmas shopping season, suggesting a last-minute change of heart by the old-line retailer. (Or perhaps an acknowledgment of reality.)

Whether any of those merchants can afford to absorb the cost of free shipping is another question entirely. (Amazon, of course, has shown itself willing to operate for years without turning a profit.) But they seem convinced that the consumer won’t settle for anything less.

“It’s pretty basic,” says Tom Racciatti, senior manager of the supply chain practice of West Monroe Partners. “They’re doing this to drive volume.”

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