Free shipping war between Walmart and Amazon may hurt small online retailers
The war between Walmart and Amazon is heating up, and lower free shipping minimums may hurt all online retailers.
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In January, Walmart announced they would do away with their Shipping Pass membership plan and reduce the free shipping minimum to $35.
Also, the company stated they would offer 2-day free shipping on a majority of eligible items. This action was aimed at Amazon Prime members to gain business from consumers that were accustomed to free 2-day shipping.
It also targeted new customers that may not be willing to pay the $99 Amazon Prime fee. Free $35 shipping for all was the first shot in this war.
In February, Amazon lowered its minimum order requirement for free shipping from $49 to $35 to match Walmart. For the last few years, Amazon has been increasing the minimum shipping amount from $25 to $49 to help with profitability.
In April, Walmart leveraged its physical locations by offering a discount for picking up your items at the store instead of home delivery.
AMAZON RETURNS TO FREE SHIPPING ON $25 MINIMUM ORDER
In its latest move, Amazon went retro and returns to free shipping on most orders with a $25 minimum. This was their policy for over a decade. To be clear, this is for non-Prime members.
Amazon Prime members continue to enjoy free shipping on virtually any order size. Also, Amazon is not offering 2-day shipping on orders over $25 (yet) as most non-Prime members will still have to wait 4 to 5 days for orders to arrive.
A NEW RACE TO THE BOTTOM?
This Free Shipping war appears to be a new race to the bottom. Have we reached the bottom? What might Walmart counter with in this battle?
Moreover, this is not all good news for online merchants not selling on Amazon or Walmart marketplaces. Each time retail giants decide to get into this fight; it reduces the value of shipping.
eBay years ago started to favor listing with free shipping by charging its fee on shipping cost. It also moved up in search results listing that offered free shipping.
Merchants that compete with lower priced products similar to offerings available on Amazon and Walmart may find they have to reduce their free shipping thresholds.
Other big box retailers like Best Buy, Target, Macy’s, are jumping into the free shipping and 2-day delivery marketing game.
All of this continues to put pressure on smaller online retailers that do not have the scale or product range to compete with larger retailers on free shipping.
SMBs may have to look at placing more products within Amazon and Walmart marketplaces to compete. They also may need to change their product selection away from higher volume commodity items to lower volume customized products.
Customized products should garner higher margins, but they also will add to customer service time. However, this is an area large retail stores will have difficulty in managing.
This shipping war is not about to stop, and there is certainly more to come. It is a good time to take a good look at your business and see where you may become vulnerable if this spirals out of control (Assuming you think it is still in control).
THE HOLIDAY SEASON FALLOUT
While a little early to speculate, but we might be heading into the most interesting holiday season yet for eCommerce? Could we see free overnight shipping on all products before its over?
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Richard is co-founder of eSeller365. He has over 17 years of experience on eBay which includes tens of thousands of sales to buyers in over 100 countries and even has experience with eBay’s VeRO program enforcing intellectual property rights for a former employer. And for about two years Richard sold products on Amazon using Amazon FBA in the US.
To “relax” from the daily business grind, for a few weekends a year, he also works for IMSA as a professional race official.