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Will you ever pay for shipping again?

Maybe not. Wal-Mart and others are dropping the threshold for free shipping.

By Karen Datko Nov 15, 2010 1:00PM

This Deal of the Day comes from Kelli B. Grant at partner site SmartMoney.

 

When Wal-Mart announced last week that it will offer free shipping on thousands of online items this holiday season, consumers looking for deals -- and Wal-Mart's retail competitors -- snapped to attention.

But the move could change the way people shop online long after New Year's: You may never have to pay for shipping again.

 

Free shipping has already become one of the most attractive promotions retailers offer. In a holiday survey by consulting group Accenture, 43% of shoppers said free shipping was their primary motivation for shopping online, up from 35% last year. "They're getting -- they perceive -- a better deal," says Chris Donnelly, who works in Accenture's retail practice division.

Plus, free shipping hits the sweet spot of holiday sales this year: While overall sales are expected to grow just 2%, online shopping and other non-store sales -- which lead to purchases that need to be shipped -- will rise 15% over last year, reports Deloitte. Yet another survey, from e-commerce firm ATG, indicates that 84% of consumers plan to shop online this season.

 

Wal-Mart's deal, which runs through Dec. 20 and opens up free shipping for nearly 60,000 items, joins others. Gap, for example, recently dropped its required minimum purchase for free shipping in half -- to $50 -- and L.L. Bean started offering free shipping with no minimums this summer (that also ends Dec. 20).

 

Retailers do get a break on their end, with discounts of at least 30% with shipping companies, says Aaron Kessler, an e-commerce analyst with research firm ThinkEquity. Bigger companies with more distribution centers can often get even better rates. Even so, they've typically passed the charges on to you -- without padding the numbers.

 

Gateway drug

At first glance, free shipping is a great deal for shoppers -- no fighting crowds at the nearest Macy's and no $5 surcharge for shipping that new sheet set. Retailers -- pressed by competition and wallet-tight consumers to offer these shipping deals -- are banking on volume during the holiday season (along with more frequent visits from impulse buyers year-round) to offset the shipping costs they've absorbed, says David Bell, a professor of marketing at the University of Pennsylvania's Wharton School of Business.

 

That's right: Retailers will make up their losses by getting you to buy more. Think of free shipping as a sort of gateway drug for consumers who might otherwise be more restrained. Shipping fees and offers that require a minimum purchase force shoppers to think more about what they buy, and whether it's worth the extra charge. But shoppers who know in advance that they won't pay anything for delivery to their door are more prone to impulse purchases or buying things they wouldn't previously have looked at online, Bell says.

 

Trial balloon

Some companies have already built business models on the concept -- which forced competitors to do the same. "Zappos took out the uncertainty of buying shoes that don't look good or don't fit by offering free shipping and free return shipping," Bell points out. For bigger retailers, this free-shipping season may serve as something of a trial balloon, says Donnelly. And unless it goes wildly awry, consumers may never pay outright for shipping again.

 

Of course, if they don't find that sales volume offsets their shipping costs, companies may pass them along in the form of small price increases. But analysts say even those won't be much, because of the reduced-price deals big retailers have already negotiated with shipping companies.

 

If you do pay for shipping again post-holiday freebie blitz, it's likely to be from a small business offering niche or handmade products, says Luke Knowles, founder of FreeShipping.org, a free-shipping-focused coupon site.

 

But even there, proprietors may opt to ditch their own sites, which require them to charge for shipping and risk scaring away customers with $10 shipping for a $20 item, in favor of selling through a site like Etsy.com or Amazon.com.

 

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