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Editor's Note: This is an excerpt from a note sent out earlier this morning by our Retail team. Click here for more information on our array of services and how you can subscribe.

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Good article today in WWD - Free Shipping: Retail's New Battleground

Takeaway: Free shipping = an offensive weapon for retailers to gain market share.

We have seen it used sporadically from players in the department store/mass channel. Most notably, Target (TGT), who over the holiday season eliminated the free shipping threshold all together, and then in February cut its free shipping  threshold from $50 to $25.

Over the next 18-24 months, it's likely we see free shipping across the board. That will manifest itself during this holiday season when retailers make a free shipping offensive play.

This Is Retailers' New Offensive Weapon to Win Market Share - 99 t

We've seen retailers, most notably Kohl's (KSS), talk about how a $25 shipping threshold isn't sustainable from a profitability perspective. We agree with the company on that.

For Nordstrom (JWN), it makes sense to offer free shipping and returns given the basket size, but for the mid-tier space...it's 600-1000 bps dilutive. The problem is that a)

  1. Consumers want it (in chart below its nearly twice as important as any other online shopping feature)
  2. If one domino falls, all others will have to move accordingly

CLICK IMAGE TO ENLARGE

This Is Retailers' New Offensive Weapon to Win Market Share - z retail