The holiday shopping — er, shipping — war is on.
Best Buy Co. Inc., the nation’s largest electronics retailer, is the first major player to get out ahead with its announcement Thursday that it will offer free shipping on online orders starting Sunday through Jan. 2. In doing so, the Richfield company will waive the $35 minimum threshold it usually requires on its website to qualify for free shipping.
Last year, Minneapolis-based Target Corp. made waves when it offered free shipping during the holidays. The company has tested sitewide free shipping a couple of times since then, but it hasn’t said yet whether it will repeat it this holiday season.
Retailers often dangle their best promotions during the competitive holiday season because it accounts for a big chunk of their annual sales. And online shopping often spikes during that time. Last year, for example, online sales accounted for 15 percent of Best Buy’s sales during the holidays, compared with 8 percent the rest of the year.
Still, it’s unclear how big of a deal free shipping will be for Best Buy since it sells many higher-priced products that would already qualify for free shipping. Jeff Haydock, a company spokesman, acknowledged that most orders on BestBuy.com are priced over $35. So the question is how many shoppers, who are usually deterred from buying cheaper items online because they don’t want to pay shipping, will take advantage of the promotion.
While some retailers such as Nordstrom and Zappos offer free shipping year-round on all orders, most retailers require some sort of minimum purchase amount before shipping becomes free. That’s a reflection of the cost associated with free shipping that can cut into retailers’ profits.
“We’re not sure how sustainable it is over the long haul because it’s a cost the retailer has to absorb,” said Charles O’Shea, an analyst with Moody’s.
Still, during the holiday shopping season, retailers are desperate to bring in as many sales as they can. So O’Shea said he wouldn’t be surprised to see other retailers match Best Buy’s holiday promotion.
“There’s always a herd mentality surrounding shipping,” he said. “So you’ll see other people following suit.”
Retailers are also facing a holiday shopping season that is expected to be less robust than last year. Amid sluggish wage growth, holiday sales are expected to increase 3.7 percent this year, which is lower than the 4.1 percent increase last year, according to the National Retail Federation.
Best Buy’s aggressive stance this year stands in contrast to its more conservative approach to shipping in recent years. It offered free holiday shipping in 2011 and 2012 but didn’t do so the past two years. And last year it raised the minimum size order for free shipping on orders year-round to $35, up from $25.
Wal-Mart requires a $50 minimum purchase on its website to get free shipping and didn’t offer free shipping on all orders last holiday season. Meanwhile, Amazon offers free two-day shipping, and in some markets free same-day delivery, to members of its $99-a-year Prime membership program. It otherwise charges shipping on orders of less than $35.
The free shipping promotion is one of several holiday-related initiatives Best Buy unveiled Thursday. The retailer said it will also offer free Geek Squad setup on many products on its top tech gifts list, which includes ultrahigh definition TVs. Other items on the list include iPads, Bose noise-canceling headphones, MacBooks and the Microsoft Surface.
For the first time, Best Buy will also allow customers to give an hour of in-home tech setup and support from its Geek Squad services as a gift.
Finally, Best Buy won’t wait until Black Friday to trot out its holiday deals. It will hold shopping events in 400 stores on Nov. 7 where the first 100 customers will get a free tech gift. The retailer will also offer “Black Friday-like deals” in all stores that day.