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Free shipping may soon be the new normal as retail competition intensifies

TORONTO - When Walmart Canada introduced free shipping on all online purchases last year, it was a clear message to its rivals that it was gearing up for a fight.

Craig Patterson, an analyst who runs the online news magazine Retail Insider, said the move by one of the world's largest retailers was bold, setting a new standard in going the extra mile for consumer dollars.

"This means war. It's a declaration of war, no question," he said from Vancouver.

For the last few years, a battle has been waging among retailers trying to set themselves apart, as entrants such as U.S. giants Target and Nordstrom arrive to compete for the same customers.

"What this comes down to is building trust with the customer," said Patterson. "Walmart knows that if they offer free shipping, they are coming out punching. When someone like Walmart does it, there is going to be scramble from other retailers to see how they can compete either by adding extra value, better customer service."

While a behemoth retailer like Walmart may be able to absorb the costs of shipping, it would be a challenging task for smaller retailers to be able to offer the same without raising prices, he said.

The head of e-commerce at Walmart Canada says it wanted to offer a seamless transition between online and in-store shopping by eliminating any minimum purchase requirement.

"It's not about an e-commerce channel, or about a store channel anymore," said Simon Rodrigue, vice-president and general manager of Walmart.ca. "It's really about the customer in the middle. If they want to buy online, if they want to buy on the phone, if they want to buy in store, we want to make sure we're servicing them."

Retailers have long struggled with free shipping in Canada, given the size of the country and the cost of shipping quickly to remote areas. The compromise, it seems, is to offer free shipping on minimum purchases, which can offset some of those costs.

Rodrigue said Walmart's ability to offer free shipping to 97 per cent of the country, and even free next-day shipping to most big cities, has helped it lure customers who either didn't know they could purchase online the same items found in the store, or were reluctant to try shopping on the website.

The Walmart Canada website now lists more than 175,000 items and gets about 400,000 visitors a day. Next month, Walmart is preparing to launch its new click and collect service, which allows Ontario customers to buy items online and pick them up - with a special access code - from lockers at 10 designated stores or at the company's head office.

Last month, online retailer Amazon announced that it was offering unlimited free shipping for six months to students in Canada through its Amazon Prime Program. After that, students pay half price for the annual service, which is regularly $79.99 in Canada.

"We designed this by thinking about our customers and finding a segment of our customers that have interesting needs that we can fulfil," said Alexandre Gagnon, country manager for Amazon.ca.

The offer is aimed at students who live in residences or dormitories, who usually don't have access to transportation, but still need regular deliveries of groceries, household items and stationary supplies. The hope is that the service will be so valuable that these students will turn into long-time customers.

Gagnon said Canadian consumers are coming to expect low-cost and free shipping with their purchases, but they still expect retailers to offer the whole package: a wide product selection, competitive prices and excellent customer service.

With more consumers opting to shop on their mobile phones, tablets and laptops, retailers are quickly realizing that they must be able to offer the same kind of experience online that customers receive in-store, said marketing strategist Brynn Winegard.

"It's a growing expectation among consumers, especially around heavy shopping times like Christmas, that there's free shipping," she said. "Everyone's busy so it becomes increasingly required and valuable for retailers to give them their time back and online shopping is a way to permit that."

Follow @LindaNguyenTO on Twitter

The Canadian Press


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