Everyone loves a good deal when shopping online. But everyone also hates to find a bargain only to get gouged on shipping. L.L. Bean and Amazon.com (NASDAQ: AMZN) hope those two factors will work in its favor as it launches a marketplace where online shoppers no longer have to suffer a dime in shipping fees. Like Amazon and its dedicated shoe site Zappo’s, L.L. Bean is hoping its recent move away from shipping fees is offset by the new customers it will win over with the deal.
It’s a bold move. The question now, of course, is how many retail stocks are going to follow? The answer may surprise you: Many.
Back in November and December, retailers got into free shipping big time to boost holiday sales. Even brick and mortar retailers got in on the free shipping act. Walmart (NYSE: WMT) made headlines back in November when it announced that it was following chief competitor Target (NYSE: TGT) in offering free shipping on a wide swath of items available online. Sears Holding Company (NASDAQ: SHLD) offered the same through Kmart, as did J.C. Penny (NYSE: JCP). It wasn’t just clothing and home online retailers that joined the free shipping rush. Electronics and entertinament retailers Best Buy (NYSE: BBY) and Gamestop (NYSE: GME) offered similar deals online.
Chief marketing officer at L.L. Bean Steve Fuller said that his company came to the decision after examining “research after research after research” showing shoppers prefer to not pay a shipping fee. Specifically, the increased revenue that’s come from shipping-free promotions is impressive. As many as 45% of online retailers offered free shipping throughout the holiday season in 2010 according to research group comScore. And that, in part, helped lift seasonal shopping 4% overall — including a 10% bump on Black Friday.
A common factor amongst all of those retailers, however, is that their shipping offers were limited. Wal-Mart only offered free shipping on specific items, while Target, J.C. Penny and others required purchases to be above $50. Amazon has offered the same shipping deal for years, but it’s only recently through Zappo’s that it began offering no-strings-attached free shipping on all online purchases.
The aforementioned companies that have toyed with free shipping over the past year are likely to follow L.L. Bean and Zappo’s example. Best Buy’s Thursday earnings report stressed the increasing importance of the company’s online retail business compared to declining in store sales, especially for entertainment products.
he aforementioned companies that have toyed with free shipping over the past year are likely to follow L.L. Bean and Zappo’s example. Best Buy’s Thursday earnings report stressed the increasing importance of the company’s online retail business compared to declining in store sales, especially for entertainment products.And given that Amazon.com is transforming its premium subscription service Amazon Prime from a shipping-fee service to a streaming video provider, the natural assumption is that free shipping is going to be the norm and not a special service for the online megastore.
So while free shipping sales are ringing up at L.L. Bean and Zappos in the short term, you can expect many online retailers to follow soon in 2011.
That’s great news for consumers. Whether it pays dividends for investors via stronger sales is anyone’s guess.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
