Pay for shipping? I don’t think so …

TakeAway: Retailers, in an effort to compete online, offer free shipping.  It may hurt their margins, but they hope to make it up in volume.

A few years ago Amazon tested free shipping in the US and cut-rate shipping in the UK.  UK sales increased, but by a far lower percentage than US sales.  Amazon fully implemented free shipping in both the US and UK.

Draw your own conclusion.

* * * * *
Excerpt from WSJ:
“Ship Free or Lose Out”

Traditional retailers are taking the expensive step of offering more free-shipping deals this holiday season, as they seek to lure the growing number of Internet shoppers to their websites and away from online-only rivals, particularly Amazon.com .

Toys “R” Us has made its entire on-line inventory eligible as long as customers spend $49. Similarly, Wal-Mart Stores Inc. has made every consumer-electronics item on its website available for free shipping through Dec. 19 with a minimum $45 purchase. And Best Buy Co. is offering free shipping for every product it offers online, including giant TV sets.

“Free shipping used to be a way to entice customers to your store over another site, but now it’s just the price of entry.”

High shipping costs can turn off customers altogether. Amanda Lordy recently canceled an order for $30 of gourmet cheese because the site was charging $14 for shipping.

Nordstrom., which in August, began offering free shipping and returns on all online orders, estimates that the free shipping cut its gross margin by about 0.15 percentage point.

Amazon, however, is expecting its fourth-quarter sales to jump between 27% and 44%. The company loses more than $1 billion a year in shipping costs. Its operating margin shrank to 0.7% in the third quarter from 3.5% a year earlier as expenses rose 48%.

Edit by ARK

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