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The free delivery gambit in retail

Jan. 03, 2015 7:51 PM ETAmazon.com, Inc. (AMZN) StockWMT, TGT, XLP, XLY, RTH, VCR, IYC, IYK, AMZN, VDC, BBY, PMR, SPLS, TJX, DKS, XRT, RSPD, RSPS, SZK, SCC, UGE, UCC, BIG, PEZ, CAB, FXD, FXG, PSCD, RETL, FDIS, FSTABy: Clark Schultz, SA News Editor45 Comments
  • The intense competition in retail over free shipping policies is expected to bring some pain to Q4 margins as big box and e-commerce firms scrap for market share, warn analysts.
  • ComScore reports that free delivery on online purchases rose to 68% in 2014, up from 44% last year.
  • Amazon (NASDAQ:AMZN): 2014 shipping costs were up 32% through Q3. That mark comes before a holiday season in which the company says it saved customers a mere $2B in shipping fees.
  • Wal-Mart (NYSE:WMT): The Bentonville giant has already warned investors it will spend heavily on e-commerce and fulfillment center expansion as it eyes +30% growth in online sales. The company may have difficulty dialing back its free delivery policies, say industry insiders.
  • Target (NYSE:TGT): Wolfe Research projects a 1% shift in Target sales to e-commerce cuts into the firm's profit margin by 5 bps.
  • What to watch: Online sales rose 16% in Q3 vs. 4% for broad retail, a differential that is expected to have widened in Q4. Retailers with a sharp shift in mix to online could have trouble hitting consensus EPS estimates.
  • Related stocks: BBY, DKS, CAB, SPLS, TJX, BIG.
  • Related ETFs: XLP, XLY, VDC, XRT, VCR, RTH, RETL, FXG, IYK, FXD, IYC, FDIS, RHS, SCC, FSTA, UCC, PMR, UGE, RCD, PEZ, PSCD, SZK

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