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Retailers cut back on free shipping
Tuesday, December 05, 2006

Online shoppers' favorite perk -- free shipping -- is becoming harder to find this holiday shopping season.

With a brighter outlook for both the economy and consumer confidence, retailers this year are still dangling free shipping on many orders, but the offers come loaded with conditions and often have a shorter and earlier time frame. Last year, amid concern that events like Hurricane Katrina and the Iraq war were taking a toll on consumer confidence, retailers liberally waived shipping charges for a broad range of online purchases.

Some of last year's largest free-shipping proponents are jettisoning the promotion altogether while others are setting higher thresholds. L.L. Bean Inc. has discontinued last year's ambitious offer of free shipping on all online purchases from the end of October through December. The only free-shipping offer it currently has planned is its year-round deal of free shipping on every order for L.L. Bean Visa card holders. Red Envelope Inc. last year offered free shipping on all orders from the end of November to Dec. 21. This year, the online gift seller offers free shipping on orders of more than $100 through Dec. 15.

Others are pushing the promotions earlier to encourage early shopping during a truncated online shopping season. Because Christmas falls on a Monday, last-minute shipping deadlines, even for expensive overnight delivery, are around Wednesday, Dec. 20, or Thursday, Dec. 21. This means retailers are closing promotions earlier to avoid last-minute costs and to manage their sales flow. At the same time, online retailers have been one-upping each other for weeks, meaning that some of the best free-shipping deals have already past and others are fast approaching.

The deadline for Neiman Marcus's current free-shipping offer is Dec. 13, a week earlier than last year's Dec. 21 deadline. But this year's deal is slightly sweeter for those who make the earlier deadline, with the store offering free shipping on all order sizes. (Last year there was a $175 hurdle through Dec. 8, which was dropped through Dec. 21.) Federated Department Stores Inc.'s Macys.com offered a one-day only free-shipping deal on orders of $100 or more the Monday after Thanksgiving. SmartBargains.com, an online discount retailer, ran six days of free shipping for email subscribers on orders of at least $50 that ended Monday, Nov. 27. Since then, its promotions haven't been as generous: A recent weekend-long offer for free shipping on purchases of three or more items lasted only through Monday morning.

The companies say they may extend or amend their promotions as they see how sales shape up. The season is off to a strong start, with U.S. online retail sales from Nov. 1 through Dec. 1 totaling $11.7 billion, up 24 percent from a year ago, according to market researcher comScore Networks Inc.

Online retailers have reason to be pleased with the early sales figures, but they are unlikely to be complacent. While the Monday after Thanksgiving, dubbed Cyber Monday, is the promotional start of the season, the biggest online shopping day -- last year Monday, Dec. 12, according to comScore -- is yet to come, meaning consumers should expect more surprise deals.

Roughly 75 percent of shoppers say free shipping is an important factor in deciding where to buy online, according to the National Retail Federation, and retailers aren't turning their backs on the promotion. Some 83 percent of retailers say they plan to offer free shipping with conditions, up from 79 percent last year, according to a survey conducted by Shop.org, a division of the National Retail Federation. There are several new types of free-shipping offers on the table this year, too. For the first time, PayPal, eBay Inc.'s online payment unit, is joining several retailers to offer free shipping on select PayPal orders on sites like Dell.com and Cooking.com through Dec. 15.

But the conditions on free-shipping offers -- from high price thresholds to fees for shipping to multiple addresses -- are multiplying and can be meaningful. Jennifer Rosen of Arlington, Va., has been inundated with online shopping deals this season, mostly through retailer email lists. A free-shipping offer from J. Crew Group Inc. on its JCrew.com site recently caught her eye, but she passed on the perk after realizing the threshold for cashing in on it was spending $175. "I am not going to spend a couple of hundred dollars to save fifteen bucks," says Ms. Rosen, a 22-year-old paralegal.

Retailers are curbing free-shipping offers as high gasoline prices threaten their bottom lines, says George Hague, senior marketing strategist for J. Schmid & Associates Inc., a catalog consulting company in Mission, Kan. He estimates that many online and catalog retailers have been hit with fuel surcharges of up to 5 percent and have chosen to reduce free-shipping promotions.

The pullback also comes as investors worry about the impact of free shipping on profitability, particularly in the case of Amazon.com Inc. Amazon offers Amazon Prime, a free-shipping program that for $79 a year gives families free two-day shipping on products sold by Amazon.com and by some of its merchants. Amazon has sometimes offered promotional trial periods to market the program but isn't currently running any sitewide offers for the holidays. A discounted Prime membership is currently one of four options customers can vote for in a weekly contest that decides which promotion the site will offer the following week. Amazon spokesman Craig Berman says the company is focused on providing convenient shipping options all year long, not just during the holidays.

Promotions such as Amazon Prime that reserve the perk for those who opt in ahead of time are becoming more popular. Many such deals are available free to anyone who registers. Gap Inc. this year launched a program that gives anyone who signed up for its email list during a four-week sign-up period before Thanksgiving a pass for free standard shipping at a $75 threshold through Dec. 20. Vermont Teddy Bear Co. offers free shipping through December to those who sign up to its email list.

First published on December 5, 2006 at 12:00 am