Target Corp. is raising the online-shopping stakes with the announcement Monday that it is lowering its free-shipping threshold on online orders to $25 from $50.
In doing so, the Minneapolis-based retailer now offers a more competitive free-shipping offer than rivals Wal-Mart, which has a $50 minimum to qualify for free shipping; Amazon, which has a $35 minimum; and Best Buy, which has a $35 minimum.
Target’s move comes a couple of months after it ended its bold holiday promotion of free shipping on any-sized order. Target executives have said that offer helped lead to a 40 percent increase in digital sales in the fourth quarter. And they have noted that digital sales have continued to accelerate even after that deal ended.
“We saw an enthusiastic response to our free shipping offer over the holidays,” Jason Goldberger, President of Target.com and mobile, said in a statement. “Now, whether guests are stocking up or doing fill-in shopping, we’ve enhanced our year-round shipping offer to be one of the best in all of retail.”
About two-thirds of orders on Target.com already qualify for free shipping. And while the retailer didn’t say how many orders would fall within that $25-$50 zone, company spokesman Eddie Baeb noted that 60 percent of all items on Target.com cost less than $25. He added that this lower free-shipping option may be appealing to customers to get some fill-in items in between their larger weekly shopping trips.
Last summer, Target broadened and simplified its free-shipping policy to make nearly all orders of $50 or more eligible for free shipping. Previously, only some items were eligible.
Improving Target’s online prowess has been one of the goals of Target CEO Brian Cornell since he came on board in August. Online sales only account for roughly 2-3 percent of Target’s $71 billion in annual sales. By comparison, online sales accounted for nearly 8 percent of Best Buy’s sales most of last year, and nearly 15 percent during the year-end shopping season.
But Target’s lower free-shipping threshold is not the sweetest deal out there. Some retailers, such as Zappos and Nordstrom, have offered free shipping on any-sized order all the time.
In addition, a number of retailers offer free shipping to members of their loyalty programs. Target’s Redcard members have enjoyed free shipping on all online orders since November 2011. Members of Amazon’s $99-a-year Prime program receive free two-day shipping on many items.
Target has also been working to improve its shipping times. The retailer began shipping some online orders straight from stores last year to get items to customers faster, instead of relying solely on farther-away distribution centers. Target is also testing same-day delivery in a handful of markets, such as Minneapolis, Miami and Boston.
This year, Target plans to open two new fulfillment centers — one in Memphis, Tenn., and another in York, Penn. — to help advance its online shipping efforts.