With its sights set on Amazon Prime, as well as chief rival Walmart’s burgeoning online business, Target yesterday said that it was slicing its minimum purchase requirement for free shipping from $50 to $25 “effective immediately” and with “virtually no exclusions.”
“We saw an enthusiastic response to our free shipping offer over the holidays,” says Jason Goldberger, president of Target.com and Mobile, in a statement announcing the move. “Now, whether guests are stocking up or doing fill-in shopping, we’ve enhanced our year-round shipping offer to be one of the best in all of retail.”
Target also says its website set sales records on Thanksgiving and Cyber Monday with mobile accounting for 60% of Target.com traffic. Meanwhile, its digital coupon app Cartwheel added 2 million new users and has more than $1 billion in promotional sales since 2013, it reports.
“Clearly, the move gives Target a little leg up on the competition, and it could very well start a free shipping pricing war among retailers — a war that would obviously benefit shoppers,” writes Brad Tuttle in Time.
But, Tuttle points out, “the most loyal Target shoppers are highly likely to be in possession of the Target REDcard, a debit or credit card that providers the user with 5% off on all Target purchases, as well as free, no-minimum-purchase standard shipping on all online orders.”
Regular shoppers on Amazon have to spend at least $35 to qualify for free shipping; two-day shipping is free for a $99 yearly subscription to Amazon Prime, which carries additional perks such as Prime Instant Video, music streaming and unlimited photo storage. Walmart’s current threshold online is $50 for free delivery in six to eight days.
Target’s new minimum “is not the sweetest deal out there,” points outs Kavita Kumar in the Minneapolis Star Tribune. “Some retailers such as Zappos and Nordstrom offer free shipping on all orders all the time. In addition, a number of retailers offer free shipping to members of their loyalty programs.” Besides Amazon Prime, “members of Best Buy’s elite rewards program, who have made $1,500 in purchases in a year, get free shipping on all online orders.”
“Amazon Prime subscribers who are happy with the service aren’t likely to be wooed away by Target.com — which has fewer items for sale than Amazon (who doesn’t?), and whose free shipping is slower than that of Prime,” Tuttle writes.
Where is it all leading?
“The U.S. consumer now views free shipping as a right,” Belus Capital Advisors’ CEO and chief equities analyst Brian Sozzi tells the AP’s Marley Jay, adding that he thinks retailers will eventually eliminate the charges. “For now, there has to be a minimum,” Sozzi says. “Over time, I think you'll see the companies use their data better and open up more distribution centers, so this minimum won't be in play.”
As for Target, it’s another move “to stop being what its executives call a ‘fast follower’ in e-commerce — a company that lets others set the agenda and quickly mimics their pricing — and take the lead,” observes Phil Wahba in Fortune. Wahba’s cover story in this month’s Fortune —“Target Has A New CEO: Will He Re-Energize The Retailer?” — details the strategy developed for the holiday season past.
In other delivery news, the Wall Street Journal’s Laura Stevens reports this morning that Atlanta-based Roadie “intends to become the Uber of package delivery by enlisting students and others “to earn some extra pocket money by delivering packages on the way to where they’re already going.”
The beta app has been downloaded only 7,500 or so times and there have been fewer than 100 transactions — all in the Southeast — since Roadie’s launch in late January but Norcross, Ga.-based Waffle House will announce today that its 1,750 outlets are becoming “part of the network of pickup points for the service, offering a place for drivers to rendezvous with both senders and receivers,” Stevens writes. And “big investors have signed on for the over $10 million initial investment round.”
The tale of how founder Marc Gorlin, who also co-founded small-business lender Kabbage, went down this Roadie after a shipment of tiles got broken somewhere between Birmingham, Ala., and his condo in Perdido Key, Fla., is replete with the joys of family and community, visions of a “transportation heat map” and even a bit of a tribute to “folks in black t-shirts making sure the [rock ‘n roll] Gigs run on time.”
“Roadie can bring out the neighborliness in all of us,” Gorlin writes. At rates ranging from $8 to $200, that is.