DEATH OF PUREPLAY RETAIL

INTELLIGENCE REPORT DEATH OF PUREPLAY RETAIL LAST MILE

Free Shipping Pressures Amazon’s aggressive investments in order fulfillment have shaped consumer expectations. Regardless of business model, virtually all retailers have been forced to follow suit in order to remain competitive, offering generous free shipping policies, low order thresholds, and expedited delivery options. Pureplay e-tailers are less likely than evolved retailers to list free shipping option as a standard policy; just 57 percent of pureplays promote free shipping within their shipping policies compared to 89 percent of evolved retailers. However, pureplay e-tailers are, in fact, offering free shipping at the same rate as their evolved counterparts—just positioned as a limited time offer, and intended to inspire urgency to convert. After accounting for the (nearly ubiquitous) free shipping offers that can be found within e-tailers’ promotional banners, social media properties and emails, 83 percent of e-tailers were observed offering free shipping at a given time. This strategy suggests that pureplay e-tailers have limited marketing levers at their disposal, and thus capitalize on free shipping as a way to drive promotional site traffic without marking down inventory. When offering free shipping above a threshold, pureplay e-tailers are also more aggressive than evolved peers. Pureplay e-tailers require an average order of $68.33 to unlock free shipping, while evolved retailers average an order value of $90.71.

Death of Pureplay Retail: Free Standard Shipping, by Business Model Percent of Brands Offering Permanent and Limited Time Free Shipping

October 2015, n=23 Pureplay Retailers, n=19 Evolved Pureplay Retailers ■ Permanent Free Shipping Option ■ Limited Time Free Shipping Offer

Pureplay Retailers

57%

26%

Evolved Pureplay Retailers

89%

Source: L2 Intelligence Report: Death of Pureplay Retail, January 2016.

Death of Pureplay Retail: Average Threshold for Free Shipping vs. Select Competitors October 2015, n=6 Pureplay Retailers, n=7 Evolved Pureplay Retailers

$99.00

$90.71

$68.33

1

$50.00

$35.00

$25.00

Nordstrom $0.00

1. Gilt, and other pureplay retailers, frequently offer limited time free shipping codes via email.

Target

Amazon

Walmart

Pureplay Retailers

Macy’s

Evolved Pureplay Retailers

Source: L2 Intelligence Report: Death of Pureplay Retail, January 2016. * Excluding retailers without free shipping threshold.

19

January 12, 2016