Business

Free Delivery Creates Holiday Boon for U.S. Consumers at High Cost

Published

9 years ago

January 2, 2015

One of Amazon's newest distribution centers in Tracy, Calif., is seen during a tour Sunday, Nov. 30, 2014. This Amazon Fulfillment Center opened in 2013 and was refitted to use new robot technology in the summer of 2014. All year Amazon has been investing in ways to make shipping faster and easier to prepare for this holiday season. At this Northern California warehouse the company is employing robotics and other new technology to help workers process the annual onslaught of shopping orders. (AP Photo/Brandon Bailey)

One of Amazon’s newest distribution centers in Tracy, Calif., is seen during a tour Sunday, Nov. 30, 2014. (AP Photo/Brandon Bailey)

(Reuters) – For top U.S. retailers, free delivery is now the norm. That is good news for shoppers, but not so much for investors.

During the just-ended holiday season, outlets from Target to Wal-Mart to Amazon expanded their free-delivery options, adding more items eligible for free shipping. They also did away with minimum spending thresholds to qualify for the perk.

Yet as more U.S. shoppers view free shipping as their right, retailers struggle to make a profit online. That struggle will become evident in coming weeks when companies report financial results for the holiday quarter, analysts said.

“For most companies, it is a very expensive proposition to try to offer fast and free,” Steve Osburn, director of supply chain for consulting firm Kurt Salmon, said in an interview. “It’s really eating away at the margin dollars at some of these retailers.”

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