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Target’s Bold Move on Shipping Could Impact Amazon and eBay

Target announced Monday that, effective immediately, all online orders of $25 or more now qualify for free shipping, with virtually no exclusions. The new minimum is down from the previous threshold of $50.

The key competitive advantage may be found in the words, “virtually no exclusions.” As many shoppers have discovered, Target’s rival Amazon excludes many low-cost items from counting toward its $35-minimum threshold for free shipping (for non-Prime customers), calling them “Add ons.”

Target’s latest move is one of a series designed to appeal to mobile and online shoppers.

  • Target offers always-free in-store pickup for eligible products – with more than 80% of orders ready in one hour – and free shipping on virtually all online purchases when using a Target REDcard.
  • Target ships a portion of Target.com orders from select stores since late last year, resulting in shorter shipping times for customers and improved inventory management for Target.
  • Target is opening two new online fulfillment centers this year, in Memphis and in York, Pennsylvania.
  • Target offers a coupon app which surpassed $1 billion in promotional sales since it launched in 2013.
  • Target offers a subscription plan with a 5% discount similar to Amazon’s Subscribe & Save program.

Tom Caporaso, CEO of Clarus Marketing Group, said online marketplaces such as eBay could see some customers drift away on purchases in the lower price ranges as a result of Target’s new offering. “Consumers love free shipping; it’s the best sales closer on the online market, and shipping charges continue to be the biggest reason why online shoppers abandon carts.”

But the move won’t be as significant to eBay as it could be for Target’s direct competitors, which include Amazon and Walmart, and since eBay customers already enjoy free shipping on a variety of purchases, Caporaso said.

Clarus Marketing Group builds and customizes subscription programs for retailers including FreeShipping.com and Return Saver.

The move doesn’t impact Amazon Prime, but it is a direct challenge to Amazon’s offer of free shipping on orders of $35 or more. “The difference between $25 and $35 may seem like a tight window of opportunity, but Target is no doubt hoping that consumers will come to its site for smaller orders and then add items to their cart while they’re there,” according to Caporaso.

Will Amazon want to compete head-to-head for the $25 to $35 slice of the consumer market? It might, he said, but you rarely see Amazon go backward or take half-measures. “It could very well decide to drop the minimum to, say, $20, or it may do something with Prime that moves the spotlight completely off Target.”

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.