Walmart's size and clout have long enabled it to make waves in retailing, and this holiday season was no exception when the world's largest retailer's decision to offer free shipping had ripple effects.
When Walmart announced earlier in the season that it wouldn't charge to ship nearly 60,000 items from its website, with no minimum purchase, other retailers were forced to follow to compete. Best Buy, the electronics chain, was just one that responded by also offering free shipping.
Free shipping has been deployed by retailers for several years around the holidays to lure shoppers. The perk became especially popular as part of Cyber Monday deals, but it has spread throughout the season, analysts said. This year the deals are even better — and even more crucial to retailers' holiday strategies. In fact, shipping has become a game changer in this most important time of year for retailers.
"Retailers should be aware of the importance of free shipping, because it could make or break their holiday season," Andrew Lipsman, an analyst with Internet tracker comScore, wrote in a recent report. "Consumers have come to expect it and, in many cases, require it to purchase online."
The trend also has implications for consumers — Walmart contends that its shoppers will save $25 million in shipping fees this holiday season. And as online and holiday sales climb, both the U.S. Postal Service and FedEx Corp. are reporting record volumes of shipments.
Shipping costs are one of the biggest hurdles to getting consumers to shop online, and retailers are offering more aggressive shipping promotions and advertising them more than ever.
Even Amazon.com, a pioneer in online retailing, announced Friday that it would expand its free shipping offer later — and allow customers to order through Sunday and still ensure delivery by Christmas Eve. The cutoff for free shipping last year was Dec. 17.
J.C. Penney began offering free ship-to-store and free home shipping on orders of more than $69 in October. Target is offering free shipping on purchases of $50 and more on 800,000 items for the holiday season. L.L. Bean began offering free shipping with no minimum this summer through Dec. 20.
Free shipping "continues to be a powerful promotional tool," said Larry Joseloff, vice president of content at Shop.org, a publication affiliated with the National Retail Federation.
About 55 percent of online transactions by Nov. 28 included free shipping, compared to 45 percent of transactions at the same time last year, according to comScore. More than half of online purchases still came with free shipping earlier this month.
"Any retailers worried about shipping should remember that consumers will be more willing to open their wallets when they can take advantage of this important incentive," comScore's Lipsman wrote.
Avid Internet shopper Paula Henry frequently gets packages delivered to the law firm where she works as an executive assistant. Henry estimates she did about half her Christmas shopping online — and said that free shipping offers made the deals more enticing.
"That played a big role," said Henry, who cyber-shopped at Nordstrom, Overstock.com and MAC Cosmetics, among other places. "I don't like to spend extra money for shipping so that was a big deal."
Holiday sales are expected to be better than they have been in several years. The National Retail Federation recently upped its holiday sales forecast to a 3.3 percent increase over last season. It had initially predicted a 2.3 percent jump. But consumers are still shopping cautiously — their purchases appear to be bargain-driven.
Consumer sentiment is what drove Walmart to offer the aggressive shipping promotions, company officials said.
"Customers are doing all they can to save this holiday, and our free shipping programs are designed to help them make every dollar count," said Walmart spokesman Ravi Jariwala.
It doesn't disclose sales figures, but Jariwala said that the company is pleased with customer response to the shipping promotions.
Grace Chung, an Amazon.com spokeswoman, pointed out that the online retailer offers its free shipping for orders of more than $25 year-round. She said that bargain shipping options are particularly important this year as consumers look to make the most of their spending.
"This holiday we know our customers want to save money, so shipping is important," Chung said.
Online sales are the fastest-growing segment of holiday sales as shoppers become more comfortable with cyber-shopping. The holiday season is expected to generate nearly $52 billion in Internet sales, a 16 percent increase from last year, according to Forrester Research.
The packages are already piling up at post offices and other delivery sites.
The U.S. Postal Service anticipates that its busiest mailing day this year will be Monday, when more than 800 million cards, letters and packages are expected to be sent on that day alone — compared to 559 million on a typical day.
FedEx saw its busiest day in company history last Monday as it picked up 16 million packages around the world. That was 13 percent more than the biggest day last year. FedEx officials don't know if free shipping directly correlated to the increased pickups, but said anything that results in increased Internet shopping is probably a factor.
"We do know that people like bargains," said Robert Boulware, a FedEx spokesman.
"The comfort level of consumers with Internet shopping is also contributing," Boulware added. "People are becoming comfortable with buying things online but they also have more avenues to access the Internet. People can use mobile devices to research and purchase online."
Some analysts argue that there are some pitfalls for retailers with Internet shopping.
Jeff Edelman, director of retail and consumer advisory services at consulting firm McGladrey, said that when people shop online it cuts down on impulse buys that might occur in a store. Making a return also might be more of a hassle for shoppers. And the price of the item must still be competitive to draw in shoppers, he said.
"Free shipping is another way of discounting," Edelman said. "If a certain site has the right product and the right net price, the consumer will buy."
Some retailers might worry that free shipping could hurt margins. But Lipsman from comScore said in his report that people buy more when the shipping is free. During the third quarter, the average order value of a purchase with free shipping was 41 percent higher than one that costs to ship, comScore found.
"It can actually be to the retailer's benefit if utilized effectively," Lipsman said.