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article imageTarget goes after Amazon with new free shipping promotion

By Dan Pelberg     Feb 24, 2015 in Business
These days it seems “The Everything Store” is getting attacked on all sides by its competitors. Now Target has upped its online marketability by giving customers free shipping on all orders of $25 or more placed through their website.
This comes in just a few years after Amazon had decided to raise its minimum cost for free shipping to $35. The question is will it be enough to lure customers away from Amazon? And, how will Amazon respond to this strategy by Target?
Target had enacted shipping deals through the holidays last year, and claim that they were received well by their customers. “We saw an enthusiastic response to our free shipping over the holidays,” noted Jason Goldberger, president of Target.com and mobile. Target had hit new sales records in 2014 both on Thanksgiving and Cyber Monday.
While online ordering generated about $1.8 billion in business for Target last year, online ordering only accounted for about 2.5 percent of their total revenue, meaning that the company still has a great deal of room to grow in that sector. It plans on opening two additional distribution centers in the United States in order to support its growing online orders.
Who is the retail giant trying to attract with this new offer? The numbers show that two-thirds of customer orders had already qualified for free shipping in Target’s previous model. The reduction in minimum cost for free shipping is meant to attract customers making smaller purchases. These customers may be stocking up on household goods but don’t want to make a trip to the store. 60 percent of the items on Target’s website are less than $25.
Target hopes this new promotion helps turn around its share price. On the year shares of Target (TGT) are relatively unchanged, sitting at $76.95 while Amazon (AMZN) is up almost 22% to $378.59.
More about Target, Amazon, Ecommerce, Free shipping
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