Target Lowers Free Shipping Threshold to $25

Source: Wikimedia Commons
In a move that is surely designed to attract more shoppers to its online and mobile offerings, Target Corp. (NYSE: TGT) announced Monday morning that beginning immediately all orders valued at $25 or more will be shipped free. The company previously offered free shipping on orders of $50 or more.

Target’s new shipping policy undercuts both the $50 minimum order for free shipping from Wal-Mart Stores Inc. (NYSE: WMT) and the $35 free shipping minimum order from Inc. (NASDAQ: AMZN).

In its announcement, the president of Target’s online and mobile business said:

Lowering the free shipping threshold from $50 to $25 is one more way Target is putting guests first and making it easier for them to shop Target when and where they want. We saw an enthusiastic response to our free shipping offer over the holidays. Now, whether guests are stocking up or doing fill-in shopping, we’ve enhanced our year-round shipping offer to be one of the best in all of retail.

Target is scheduled to report fourth-quarter and full-year results before the market opens on Wednesday. Analysts are looking for quarterly earnings per share (EPS) of $1.46 on revenues of $21.64 billion. For the year, EPS are expected to total $3.96 on revenues of $72.98 billion. Target has missed consensus EPS estimates in two of the past four quarters, but analysts have raised their consensus target from $1.22 to the current expectation of $1.46 in just the past 60 days.

Whether or not the lowered threshold for free shipping succeeds at attracting new customers, the change does seem to be coming too late. Not only that, it may be headed in the wrong direction. Amazon raised its free-shipping threshold to $35 from $25 last year and it raised its annual Amazon Prime membership fee, which includes free two-day shipping on all orders, from $79 to $99.

Wal-Mart is unlikely to match Target’s new free shipping level, having just said that it will take a hit of about $0.20 per share on raising wages and providing more training for its workers.

Target’s shares were down fractionally to $76.73 just after Monday’s opening bell, in a 52-week range of $55.25 to $77.75.

ALSO READ: Is Target Still Misunderstood by Investors?

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