Nordstrom Inc. (JWN) will offer free shipping permanently on all purchases at its more than 100 namesake department stores starting next week, increasing competitive pressure on its rivals.
The move comes about six months after the Seattle-based retailer became the first department-store chain to add standard free shipping and returns on online orders. The company also is testing same-day delivery at a flat rate of $10 for online orders of any size.
Free shipping has become a weapon in retailers’ fight for market share as the pace of U.S. consumer spending continues to trail its 2010 peak. While Nordstrom said it has benefited from its initiative, rivals that have partially matched the efforts have said free shipping has hurt profitability.
“To be a leader you have to read the tea leaves, and free shipping is definitely the way things are going,” Liz Dunn, a New York-based analyst with Macquarie Group (MQG), said in a telephone interview. “Although investors worry that free shipping is a cost, ultimately the growth opportunity in sales far surpasses that.”
Dunn rates the shares neutral.
Nordstrom previously granted free shipping for store purchases of $25 or more, items not on hand, website orders totaling $200 or more and during occasional promotions.
“Shipping costs are something that have been known to stop customers in their tracks,” Jamie Nordstrom, president for e- commerce, said in a telephone interview from Seattle yesterday. “We have tried to break down those barriers as much as we can.”
Nordstrom was little changed at 9:40 a.m. in New York. The shares rose 17 percent last year.
Adding free shipping has boosted revenue by converting more website visits into sales and increasing the number of units sold, said Nordstrom, 39.
“This definitely makes economic sense for Nordstrom,” he said.
Nordstrom has an advantage because its inventory is integrated across its channels, making fulfilling orders more efficient, he said. Macy’s Inc. (M) and other competitors are still working to integrate theirs.
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