Retail giant Myer is now offering free shipping to online shoppers, with industry experts warning the move will set a precedent for other retailers to follow suit.
In a bid to boost its sales, and compete with local and international online stores, Myer has eliminated all fees associated with shipping and handling for its website.
Myer chief executive Bernie Brookes said last week the move should boost the company’s online turnover without damaging profitability.
“We do about $5 million a year online. The plan is to increase that closer to $50 million a year very quickly,” Brookes said.
“This is something we have been planning for awhile now. Obviously, free shipping comes at a cost but we have run the numbers and we believe the model works.”
A Myer spokesman said the company’s research indicated revenue could increase between five and tenfold when an online retailer offered its customers free shipping.
“Our exclusive offer will cover up to 4,000 products, including the latest in new summer fashion for him and her, youth fashion, homewares and electrical,” the spokesperson said in a statement.
David Jones is also reconsidering its online offering; a spokesperson said the company currently charges $4.95 shipping for gift cards and $9 for other packages, but is reviewing this structure.
The department store is also investigating a range of technology and online initiatives, including pricing, placing more products online, and greater use of iPhone applications.
While experts welcome the move, they warn it will have ramifications for the rest of the retail sector. Retail guru Brian Walker says start-ups in particular will need to step up their game.
“This does make it challenging for smaller retailers, but ultimately they will have to follow if they are going to compete,” he says.
Similarly, Colin McLeod, executive director executive director at the Australian Centre for Retail Studiesof the Australian Centre for Retail Studies, says the challenge for start-ups is to identify ways to add value for customers, and this extends to their online pricing model.
“Unless start-ups can provide added value, they will also get caught up in the product/price cycle and will lose out to stores with lower costs,” he says.
“In many cases, the things that customers value aren’t the products they buy – it is the passion for the product, the passion for the customer, and the ability to create a relevant and engaging connection to the customer.”
“These factors then need to be built into the business plan and measured on a regular basis, and they need to be measured from a customer perspective.”