Walmart’s Improved Free Shipping Will Cost It Dearly

By Douglas A. McIntyre Updated Jan 11, 4:01PM EST · Published Oct 23, 6:25AM EDT

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Walmart’s Improved Free Shipping Will Cost It Dearly — © courtesy of Walmart Inc.

Walmart. “Live better.” “Save Money.” More recently, get free shipping on a wider range of products, just as the holidays approach. The new free shipping program will cost Walmart Inc. (NYSE: WMT) a lot of money.

Walmart will start to offer free two-day shipping for items sold at the retailer’s “MarketPlace.” This segment of Walmart.com is for items sold by third parties and not by Walmart. Walmart wants to make free shipping and pickup of these MarketPlace items as good as those offered on Walmart’s own inventory.

The world’s largest retailer said the new holiday promotion will allow customers new conveniences:

With that in mind, we’re making two significant changes to our marketplace shopping experience. We’re working with our marketplace sellers to make millions of items available for free two-day shipping without a membership fee and simplifying the returns process for items purchased from marketplace sellers, including launching the ability to facilitate returns of these items at any one of our 4,700 stores. The improvements will begin to roll out this November, just in time for the holiday season.

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It also will make returns of third-party items to stores easier. The system must be complex, because of the huge number of third-party partners Walmart has.

What Walmart did not say is that the practices are not just aimed at customer convenience. Amazon.com Inc. (NASDAQ: AMZN) also has a massive competing third-party business. As is the case with Walmart, service by these sellers is uneven, which reflects poorly on both companies. That, in turn, can cause customer attrition. The battle between the two companies to get and hold customers already has become aggressive because sales in November and December are so critical to both revenue and profits.

Free shipping is not free for Walmart. It adds costs to every online sale. As these sales mount into the hundreds of millions of items, Walmart ships them via UPS, FedEx and the U.S. Postal System. And for Walmart, those shipments are not free.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.