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Shipping showdown

Free shipping at center of retail competition

Free shipping
Online retailers are lowering minimum requirements for free shipping.

Several major retailers have lowered the minimum requirements for free shipping, another sign the competition for online shoppers is heating up.

For example, Toys R Us has lowered its free shipping minimums from $49 to $19, below the minimums set by Target ($25) and Wal-Mart ($35).

“Based on current insights and a comprehensive review of the competitive landscape, we’ve decided to drastically lower our free shipping minimum, just in time for the holiday season,” said Matt Blonder, a Toys R Us vice president.

The surge in online shopping has driven major growth in the shipping sector, especially during the holidays. The Postal Service alone delivered approximately 524 million packages last December, an 18 percent increase over 2013.

While free shipping options may not be profitable in the short run, retailers are betting that gains in customers will outweigh the costs, industry analyst Rafi Mohammed told CNBC last week.

“Many of these brick-and-mortar stores are finally taking the online competition seriously. They are trying to get back market share [and are] willing to sacrifice margin just to stay in the game,” he said.

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