Retailers such as Amazon are counting on high online sales, increasingly treating free shipping as a cost of doing business.David Paul Morris/Bloomberg
The e-commerce battle is shifting ground this holiday season as major retailers scramble to offer low-cost, sometimes free, shipping.
The stakes are higher than ever as discounter Wal-Mart Canada Corp., with the clout of its U.S. parent, trumpets free shipping on almost all of its products sold online in a widening range of categories, from electronics to toys and jewellery – stocking 10 times more merchandise on its site than a year earlier.
A growing array of retailers feel the pressure to lower or drop their minimum purchase required for free shipping as U.S. rivals' promotions spill over into the Canadian marketplace. Cyber players are beginning to tout free deliveries with virtually no strings attached either year-round or on special occasions such as Cyber Monday following the American Thanksgiving in November and Free Shipping Day in December.
"Customers' behaviours have changed so much," said Simon Rodrigue, general manager of e-commerce at Wal-Mart. "It does give a leg up to Wal-Mart and it's why we're investing and focusing so much on this online channel."
In an intensely competitive retail landscape, merchants feel the heat to match the free-shipping offers of their U.S. rivals.
The pressure has prompted retailers such as Indigo Books & Music Inc. to broaden free-shipping policies, while other domestic retailers, including fashion purveyors Marks and rival Roots, pitch free deliveries in the holiday season with no minimum order required. They're counting on drawing more cyber customers and, in the process, raising the stakes for everyone.
"The realization by the retailers is that it's a cost of doing business, especially if they're competing against American brands," said Jim Okamura of Okamura Consulting. "It's one of those signs that the Canadian e-commerce sector is playing catch-up to the more mature U.S. marketplace."
U.S. apparel specialist L.L. Bean raised the bar for online sellers when it introduced unconditional free shipping in the U.S. and Canada last year, and benefited from a sales surge, he said. Yoga chain Lululemon Athletica Inc. was a pioneer in free deliveries, enjoying more than a doubling of its e-commerce sales in its fourth quarter of 2011.
As free shipping becomes the price of entry into e-commerce, the promotion can help retailers grab attention, including on Free Shipping Day on Dec. 12 and its promise of free delivery by Christmas Eve.
So far this year, 58.4 per cent of the retailers in Canada that have signed up to participate in Free Shipping Day will offer no-charge deliveries on all orders, compared with 83.5 per cent in the U.S., said Luke Knowles, founder of FreeShippingDay.com and FreeShippingDay.ca.
South of the border, he touts free shipping for Christmas Eve delivery for five more days, until Dec. 17, than in Canada, said Mr. Knowles, a Regina native who lives in Colorado. It is just the second year that he's run the event in Canada and the fifth year in the U.S.
Mr. Okamura said that American chains' extra five days of free shipping before Christmas give them another edge, and underline the challenge facing Canadian retailers. They grapple with steeper costs of shipping products long distances in this country, he said.
Still, some chains are lowering minimum purchases for free shipping. Best Buy Canada, Amazon.ca and Indigo have a low enough threshold – $20 for the former and $25 for the two latter ones – that it isn't a big barrier to closing a sale, observers said.
Others with a higher threshold are still testing the e-commerce waters. Jeremy Reitman, chief executive officer at clothier Reitmans (Canada) Ltd. in Montreal said its $100 minimum purchase for free shipping is about the average amount that its cyber customers purchase on its site.
Just in its second holiday season of online selling, Reitmans is early in the game and, in the future, will consider lowering the threshold to draw more shoppers, Mr. Reitman said. "We're building the business."
Sears Canada Inc. re-instituted a minimum purchase requirement of $75 for free deliveries this year after having done away with it in 2011. At the same time, the retailer extended the period for free deliveries another month, to October, in 2012.
Sears' $75 threshold is in line with that in the industry and lower than its customers' average purchase size, spokesman Vincent Power said. "It also allows us, from time to time, to offer no threshold promotions."
This year Indigo bolstered its policy of free shipping on orders of more than $25 online by offering free deliveries on all cyber orders picked up at stores. Its research found that free shipping is the top factor influencing online purchasers, spokeswoman Janet Eger said.