The shipping wars are intensifying.
Amazon fired the latest salvo across Wal-Mart‘s bow. Less than three months after Amazon reduced its order minimum for free shipping to $35, in an effort to stave off Wal-Mart’s identically priced shipping policy, the online behemoth has quietly lowered the threshold for free shipping to $25. However, it will take five to eight business days for products to be delivered.
Amazon in February 2016 raised its free shipping threshold for non-Prime members to $49. Wal-Mart appeared to have the advantage in January, when it scrapped its $49 Shipping Pass membership fee, replacing it with free two-day shipping for $35 on any order of eligible items, while shipping to stores is free. Previously, the threshold was $50. The Bentonville, Ark.-based retailer bested Amazon’s three- to five-day delivery window for Prime.
Online shoppers in studies say the cost of shipping is a pain point in their online experience. Target doesn’t charge shipping fees for orders of $25 or more, while Nordstrom has eliminated shipping charges entirely. But retailers that rush to lower or eliminate shipping charges pay a price in profitability.
“Shopping costs are important but so is convenience,” said Carol Spieckerman, founder of Spieckerman Retail. “Amazon and Wal-Mart need to balance both. In some scenarios, convenience is actually more important, so focusing on price only can drive margins down without winning the sale in the end.
“The key will be to offer options that address convenience and price without adding unnecessary complexity,” Spieckerman said. “Convoluted shopping and pricing schemes are off-putting to shoppers. Amazon is clearly watching and reacting to Wal-Mart — and Wal-Mart isn’t just playing defense. Wal-Mart’s ongoing challenge will be to offer a clear and compelling alternative to Amazon Prime.”
Wal-Mart has been intent on leveraging its network of 6,700 trucks in true omnichannel style. “Our cost to ship an item to one of our stores is 75 cents. It’s $5 or $6 to ship something to a customer’s home,” said Marc Lore, president and chief executive officer of Wal-Mart U.S. e-commerce and founder of Wal-Mart-owned Jet.com. “We launched a pick-up-in-store discount. We’re saying, ‘If you want to shop smarter, you can save 5 percent.’ We’re not beating up the vendors, we’re cutting supply-chain costs.”