What does Walmart’s free shipping mean to the industry?
Last week Walmart announced free shipping on walmart.com for the holiday season. The scope is staggering: the offer covers more than 60,000 products and comes with no purchase minimum.
The move is a maneuver in Walmart’s price war with Amazon and Target, coming just days after Walmart lowered prices to compete more fiercely with its competitors. In the level-playing-field world of ecommerce, Walmart is making a compelling case for many consumers not to shop anywhere else.
So what does this action mean for the rest of the industry, not just the billion-dollar behemoths at war? Several things.
1. Expect heavy price wars this season. Indeed, they’re already underway, what with campaigns and discounts starting in October this year, in part to offset the sluggish economy. (Then again, this happened in booming 2007, too.) Every store will be watching its competitors’ prices, and consumers will, too.
2. Look for the spread of no-limit free shipping. Already, some larger retailers (like LL Bean, whose promo is shown here) have chosen to match Walmart’s offer. Amazon hasn’t budged yet, in part because its $25 hurdle is fairly accessible. If Walmart chooses to extend its offer past the holidays, though, watch for shipping costs to rapidly become an albatross on mass-market sites.
3. The small-business end of the online CPG market may be in trouble. Walmart’s promotion allows consumers buying $9.88 toys to shop walmart.com for value–good for consumers, bad for small competitors, who may spend $7 on average on shipping. Expect startup retailers to shift focus away from small-ticket items unless they have access to favorable postal arrangements.
4. Don’t expect this to hurt the specialty stores. Bloomingdale’s has free shipping on $300-and-up purchases, Nordstrom $100: this isn’t about them. Nor is it about niche brands whose distribution relies on the digital channel. Those retailers can still charge fair shipping costs, because people are seeking out specific products. Walmart may encourage an expectations shift, but those expectations may or may not extend to every corner of the online retailing industry. (Yet.)
Check walmart.com in January to see if free shipping sticks around or if it’s just a market-share maneuver for the holiday season. That pending decision by Walmart may permanently alter the industry.