December 19, 2008

Online Merchants Offer Free Shipping To Stimulate Sales

Online merchants are hoping to cash in this Christmas by offering free shipping, despite the worst Holiday shopping season in decades.

According to information from the National Retail Federation, more than 75% of online merchants are offering free shipping for Christmas, as long as items are purchased by this Friday, the deadline for ground mail delivery by Christmas.

Experts believe the efforts may help this season's Internet sales, which are holding steady at $29.2 billion this season.  Until this season, online retailers had seen 25 percent sales growth each year.

Many believe this could finish as the weakest season since 1969, when same-store sales were first tracked.  Same-store sales are sales at stores open at least one year, and are considered a key indicator of a retailer's health.

"The economy is in a very bad way and every sector, every segment, every distribution channel, every everything is taking a hit," said Donna Hoffman, marketing professor at the University of California and co-director for the Sloan Center for Internet Retailing.

"I think the most significant tactic retailers have in their arsenal is free shipping," she said. "Offer free shipping and it really stimulates sales."

Preliminary data showed a strong start to the holiday season due to many liberal sales offers online and off.  When retailers backed off on their deals, sales began slipping.  Now merchants are hurrying to catch last-minute shoppers with markdowns and sales.

Old Navy and the Gap Inc. are offering online shoppers up to 60 percent off purchases, while shoe store Zappos.com, and J.Crew are sending email blasts promoting free shipping.

Some merchants are also offering Christmas Eve delivery for purchases made by 5pm EST on Dec. 23. 

On Thursday, Wal-Mart extended its shipping deadline to Dec. 22, and is offering standard shipping through Dec. 20.

Amazon.com offered free shipping until Tuesday to customers enrolled in the retailer's "prime" program.  The company's standard shipping was cutoff for most shoppers on Thursday.

Amazon spokeswomen Sally Fouts said the company didn't have a good estimate on how much business they would see last minute.

"I think consumers feel more and more confident this year that they'll get their packages on time," said Andrew Lipsman, analyst for comScore.


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