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Wal-Mart says no to free shipping on online orders under $50 this holiday season

October 29, 2015 02:53 PM
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(Bloomberg)—Wal-Mart Stores Inc.’s e-commerce site won’t be offering free unlimited shipping this holiday season—eschewing a tactic that many U.S. shoppers seek—as it focuses instead on getting online customers to pick up items at stores.

Shoppers who spend less than $50 on Walmart.com will either have to pay for shipping or arrange to have their items sent for free to a physical store, the Bentonville, Arkansas-based company said Thursday.

The move is a gamble that Wal-Mart can leverage the chain’s more than 4,600 bricks-and-mortar U.S. stores in its fight with Amazon.com Inc. Wal-Mart also is adopting a service that customers check in with their smartphones when they arrive at the store, alerting the staff and expediting the buying process. The company has already been testing the mobile check-in system at its Sam’s Club warehouse stores.

Still, demanding home-delivery fees can be a risk, said Brian Yarbrough, an analyst at Edward Jones & Co. In contrast, Best Buy Co. is offering free shipping on all orders this holiday season.

“Without free shipping, you lose a lot of customers,” he said. “Retailers have been finding that the time when most people abandon their order online is when it shows the shipping charges at the end. That’s when they are most likely to just say, ‘I’m out.’"

Profit crunch

Online shoppers are growing more accustomed to having items delivered to their door, especially around the holidays, and may not want to drive to a Wal-Mart to get their gifts. But the retailer has embarked on a broader effort to make stores more enticing and central to its e-commerce operations. It’s also trying to keep its costs down, something that’s harder to do with generous free-shipping policies.

Wal-Mart warned investors earlier this month that profit would decline as much as 12% next year, hurt by higher labor costs and its e-commerce expansion. The news sent the stock down 10% in a single day, the worst decline since 1988.

In-store pickup may be a way to help profit margins, as well as spurring customers to make impulse buys, Yarbrough said.

“The best scenario is if customers do in-store pick up and then on their way out find something else they need to buy,” he said.

More Santas

The company said on Thursday that it’s working to improve the experience in its stores. For the holidays, it’s letting people get their photo with Santa Claus at more locations and giving employees seasonal items they can wear to make stores seem more festive, said Judith McKenna, chief operating officer for Wal-Mart’s U.S. operations.

Wal-Mart will start offering discounts on thousands of items, such as iPads and televisions, on Nov. 1. That’s similar to what it did last year, but the company will rely less on short-term weekend offers. Wal-Mart didn’t comment on its plans for Black Friday, the day after Thanksgiving, which serves as the traditional kickoff for the holiday season.

Wal-Mart expects its mobile app to play a big role this holiday, with more than 210 million visitors projected to use the service during November and December. That’s up from 18 million in 2013. Almost 75% of traffic to Walmart.com is expected to come from a mobile device over the holidays, the company said.

Amazon’s policy

Hunting for free-delivery deals has become a common practice for holiday shoppers in recent years. Amazon, the biggest online retailer, has a patchwork of shipping policies. Its Prime subscribers, for instance, get free shipping in exchange for a $99-a-year subscription. The company also waives shipping fees on some orders exceeding $35 and orders of certain smaller items, such as earplugs and mobile-phone accessories.

To compete with home delivery, in-store pickup needs to be faster and easier, Yarbrough said. If a customer has to walk all the way to the back of a store, and then wait 10 to 15 minutes, it’s not an appealing proposition, he said. To address those concerns, Wal-Mart has been moving pickup areas to the front of the store and adding signs to make them easier to find.

“As of last year, it was a very inconvenient and not smooth process,” Yarbrough said.

 

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