NEW YORK, N.Y. – Target Corp. is offering for the first time free holiday shipping on all items, including even $6 lipsticks, as the discounter throws itself in the ring to compete better with the likes of Amazon.
The Minneapolis-based chain said its free shipping offer starts Wednesday and will last through Dec. 20. The move is unusually early for a retailer — coming weeks before the official holiday season kickoff over the Thanksgiving weekend — and could squeeze Target’s profit margins. But the strategy underscores how retailers are willing to do whatever it takes to grab shoppers in the holiday shopping season, which accounts for about 20 per cent of the retail industry’s total sales
“We know shipping costs play a big role in online purchasing decisions …. We believe our free shipping offer will create excitement and incremental sales for Target,” said Kathee Tesija, Target’s executive vice-president and chief merchandising officer.
The incentive comes four months after Target unveiled a permanent free shipping offer for those spending at least $50 online, a strategy the company said has had strong reception.
The free shipping holiday incentive is one of a number of enticements that Target is pushing, from more trendy merchandise to spiffed up apps, to win back consumers as it deals with its own problems as well as industrywide challenges.
Target, along with other big-box stores, is trying to woo back customers increasingly researching and buying on their smartphones and tablets. It’s also grappling with a still slowly recovering economy.
But Target is also wrestling with its own specific problems that cost its former CEO his job and led to the hiring of PepsiCo executive Brian Cornell in early August. It’s trying to move beyond a massive data breach that hurt holiday sales last year. And it’s also trying to restore the discounter’s reputation as a cheap chic fashion purveyor.
Target also aims to play catch up with rivals who have been offering services that cater to shoppers who want to jump back and forth from stores to their smartphone. Target is now shipping products directly from a network of 135 stores in 38 markets so online customers can get items within one day of standard delivery. It’s also spending 50 per cent more on digital advertising this holiday season compared with last year.
Target’s online sales increased 30 per cent in the latest quarter ended Aug. 2, though analysts estimate it only represents less than 2 per cent of total sales.
“We see mobile as a front door to the brand,” said Cornell.
As for free shipping, only a handful of retailers including Neiman Marcus and L.L. Bean offer that all year round without any thresholds. But Forrester analyst Sucharita Mulpuru says more and more retailers are offering special free shipping promotions that have become a cost of doing business. Such expectations come as online king Amazon.com has been beefing up services for its $99 Prime Loyalty program that includes free two-day shipping on many of its items.
Mulpuru estimates that free shipping costs stores $3 to $6 per order.
“It’s a slippery slope,” Mulpuru said. But she noted, “(Target) doesn’t want to lose any more market share to the online channel.”
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