When it comes to holiday shipping, free beats fast, according to Deloitte's holiday survey of consumer spending intentions and trends: 88% of respondents said they prefer free shipping over getting their purchases within a couple of days.
"The same percentage of shoppers prefer fast shipping over free compared with last year, but perceptions about delivery speed have changed considerably," said Deloitte Vice Chairman Rod Sides in a press release. "The expectation for delivery has become two days or less. Fast and free used to be considered incentives, and now they're just table stakes."
Setting the standard
Amazon (NASDAQ:AMZN) set the standard in fast, free shipping with its Amazon Prime loyalty program. For a set fee -- currently $119 a year -- members get free two-day shipping on more than 100 million items. Walmart (NYSE:WMT) has attempted to compete with Amazon by offering free two-day shipping on e-commerce orders of more than $35 -- no membership required -- although its has just a mere few million items on its list.
For this holiday season, Amazon has extended the free shipping deal to everyone, albeit with a caveat. Normally, those who aren't Prime members must spend $25 on qualifying items to receive free "super-saver" shipping. For orders placed for delivery before Dec. 25, the e-tailer will drop that minimum, but the free shipping will be of the five-to-eight-day variety. The company will also offer same-day delivery on about 3 million items to Prime members who live in eligible areas.
Amazon's moves likely were in part a response to Target's (NYSE:TGT) decision to offer free two-day shipping with no minimum order for the season. Walmart kept its $35 minimum in place, but expanded the shipping perk to cover third-party "marketplace" sellers.
And U.S. consumers, it turns out, are willing to be a bit flexible to get those "free" shipping deals. According to the Deloitte survey, 61% of shoppers specifically purchase items because they qualify for free shipping. In addition, 66% said they'll to wait for three to seven days to receive their order as long as it ships free.
While people have adapted to the idea that they may need to be patient in exchange for free shipping, they've gotten a little less patient in terms of how they view "fast." This year, 62% defined "fast shipping" as two days or less, which was up from 54% in 2017. On the other side of the coin, the percentage that see three-to-four-day delivery as fast decreased from 35% to 25% in the past year. Nearly half (47%) of respondents said they will shop in brick-and-mortar stores to avoid shipping costs, while 72% cited free shipping as a reason they will shop online.
A new normal
While two-day shipping has become a retail industry standard in one sense, consumers generally seem OK with slower delivery speeds as long as shipping is free. But no-cost shipping has become the price of admission for retailers aiming to compete seriously for holiday shopping dollars, and Amazon, Walmart, and Target have set high bar for other retailers to meet. It may cut into profit margins for the trio, but they can afford it.
Less muscular retailers may be hard pressed to offer even slow free shipping. If they don't, it could cost them a fair slice of sales, resulting in a holiday season where the rich get richer, and the already-struggling suffer even more.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.