Retailers court web customers with free shipping
Lisa McKnight will do a quarter of her holiday shopping online this year.
Before she buys something, she makes sure she can get it delivered for free.
“I won’t get it if it’s not free shipping,” said McKnight, 54, of Franklin Park. “Why pay if you don’t have to?”
This year there’s been a shipping war among retailers, who dangle carrots of free and same-day service to drive sales and fight back against their online rivals.
Wal-Mart, Target, Macy’s and other large retailers are offering aggressive discounts on shipping and retooling their operations to speed delivery of items purchased online.
Such deals cut into stores’ holiday profits, the most important sales period for retailers, but shipping is part of a larger strategy to take back customers lost to online competitors and win customer loyalty beyond the holiday shopping season.
“No matter what you sell online, your customer is also an Amazon customer. That’s who they’re competing against,” said Steve Osburn, a director at Kurt Salmon’s Retail and Consumer Group in Atlanta. “Right now, they’re doing it to maintain their customer or get their customers back, and at the same time they’re trying to figure out how to do it profitably.”
Forty percent of holiday spending this year is expected to be conducted online, and free shipping is a leading factor driving purchase decisions, according to financial consultant Deloitte. More than eight out of 10 retailers offer some option for free delivery, Osburn said.
Target will ship any item in the store at no cost until five days before Christmas. The retailer also offers same-day pickup for items purchased online — a model that other retailers, including Dick’s Sporting Goods, have been experimenting with this season.
Fashion retailer rue21 “will be offering some aggressive shipping deals” this year that will be revealed on Thanksgiving Day, said Brett Trent, senior vice president of digital retail at the Warrendale-based company.
It has no choice but to be generous.
“In our competitive situation, free shipping all day, every day, over $50 is the new normal,” Trent said. “Occasionally, there’s free shipping with no minimum.”
Speed and reliability also matter, especially as retailers try to regain consumers’ trust after last year’s fiasco, when millions of packages were not delivered by Christmas.
Macy’s is experimenting with same-day delivery in eight locations — Pittsburgh is not among them — and Wal-Mart has rolled out new proprietary technology to make sure it can deliver orders on time.
A major change from past years has been emphasis on shipping directly from the stores. All of the roughly 600 Dick’s stores can ship directly to online customers. This allows the sporting goods retailer to better manage its inventory and lower its shipping costs because its existing staff can take care of boxing up the items and sending them out.
These changes have required logistical and technical innovations that have cost billions. Wal-Mart, the nation’s largest retailer, said it would spend up to $1.5 billion on e-commerce initiatives in fiscal year 2016, up from $1 billion this year.
Retailers seem to be more willing to invest in better inventory management software, said Tamara Saucier, vice president of retail solutions at GT Nexus, a supply-chain management software developer whose clients include Dick’s and South Side-based American Eagle Outfitters.
In a world of same-day shipping, companies must be able to track stock with granular specificity, down to a T-shirt’s size and color, so workers don’t waste time sorting through boxes to find a single item ordered online.
“Retailers are looking back into their supply chain and saying, ‘I need to be much more agile,’ ” Saucier said.
Retailers are also communicating more closely with shippers.
UPS began talking with large retailers immediately after the holiday season ended last year to get estimates on shipping volume that would help it plan, said Susan Rosenberg, a UPS spokeswoman.
FedEx expects to move more than 290 million shipments between Black Friday and Christmas Eve, an 8.8 percent increase, and UPS anticipates that its volume will be up 11 percent to 585 million packages in December.
Both shippers have hired tens of thousands of seasonal workers to handle demand, and UPS said it’s trying to be flexible, setting up mobile shipping stations where demand warrants it.
Shippers are also being careful about what they promise. They have set themselves up to handle expected volumes, but won’t take the blame — or absorb the extra costs — if last-minute orders surge beyond what retailers told them.
“We have been quite direct with (retailers), if they are going to go above what has been planned and committed,” Rosenberg said. “We want to work with you, we want to be able to provide the service, but if we incur costs, we may have to pass those costs on to you. It’s just putting the customers on notice.”
If there are shipping delays, Cindy Beattie said she will be prepared. The 62-year-old Valencia resident was shopping at the Cranberry Mall on Monday but said she will do about 40 percent of her holiday shopping online.
She doesn’t intend to pay for shipping and realizes that means planning, so she doesn’t pay to overnight a gift. If it comes down to a last-minute item, she would rather go to the store.
“If I can pick it up in the store for free, I’d rather do that than pay for shipping,” she said. “But I usually plan well.”
Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or [email protected].