Target Corp. raised 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 better free shipping deal than rivals Wal-Mart, which requires a $50 minimum purchase to qualify for free shipping, as well as Amazon and Best Buy, which both have a $35 minimum.
Jason Goldberger, president of Target.com and mobile, said in a statement that its shipping offer is now "one of the best in all of retail."
Target's latest move comes after it one-upped many of its competitors with a bold holiday promotion of free shipping on any size order. Executives said last month that Target's free shipping promotion during the holidays helped lead to a 40 percent increase in online sales in the fourth quarter. And they noted that those digital sales have continued to accelerate since the promotion ended Dec. 20.
It also comes as CEO Brian Cornell looks to invest in accelerating the retailer's digital growth after playing catch-up to other companies in the last couple of years.
Online sales account for roughly 2 to 3 percent of Target's $71 billion in annual sales. By comparison, online sales accounted for nearly 8 percent of Richfield-based Best Buy's sales most of last year, and nearly 15 percent during the holidays.
Last summer, Target also made some moves to improve its free shipping deal, noting that the most common reason customers abandon their shopping carts online is when they realize they have to pay for shipping. So the retailer broadened and simplified its policy to make nearly all orders of $50 or more eligible for free shipping. Previously, only some items were eligible.
About two-thirds of orders on Target.com already qualify for free shipping. And while the retailer didn't say how many orders fall within that $25 to $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.
Target's new $25 minimum for free shipping is not the sweetest deal out there. Some retailers such as Zappos and Nordstrom offer free shipping on all orders all the time.
In addition, a number of retailers offer free shipping to members of their loyalty programs. Target's Redcard holders have enjoyed free shipping on all online orders since November 2011. Amazon's $99-a-year Prime program gives customers free two-day shipping on many items. And members of Best Buy's elite rewards program, who have made $1,500 in purchases in a year, get free shipping on all online orders.
Target also has been working to improve its shipping times. The retailer began shipping some online orders straight from some 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.
To help further advance its shipping efforts, Target plans to open to new fulfillment centers this year — one in Memphis and another in York, Pa.
Target reports its full fourth-quarter results Wednesday.