Wal-Mart Competes For New York Shoppers Online

Walmart.com is offering free shipping this holiday season. In New York City, store owners have been somewhat insulated from the competitive pressures created by the world's No. 1 retailer. Wal-Mart hasn't opened any stores there (yet). But with free shipping, Walmart.com may become more of a direct threat to local shops. Retailers all over the country are scrambling to figure out how to keep up with Wal-Mart, which is always finding new ways to please consumers — and drive competitors crazy.

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Wal-Mart has announced it will offer free shipping until December 20th. Of course, there is an asterisk - that's free shipping on what they call eligible items.

To find out what impact Wal-Mart's offer might have, we're going to hear from a place with no Wal-Mart, New York City.

Here's Charlie Herman of member station WNYC.

CHARLIE HERMAN: New Yorkers pride themselves on being able to find just about anything in this city. Michael Tavana is from Queens.

Mr. MICHAEL TAVANA: There's such, you know, a large amount and a variety of all different types of food. If you can't find it here, I don't think you could find it anywhere else.

HERMAN: Beth Robinson is a mother of two young children. She knows a lot about shopping and finding deals in New York.

Ms. BETH ROBINSON: I can't think of anything I've ever needed that if I couldn't find it, I couldn't ask someone and they'd say, oh, you need to go X, Y or Z.

HERMAN: But there's one thing New Yorkers won't find in their city - Wal-Mart. Then again, when the Arkansas-based retailer offers free shipping for all sorts of goods - from a 55-inch, $1,300 flat screen TV to holiday greeting cards with no minimum purchase - some New Yorkers take notice.

Ms. ROBINSON: It could make it the first place I look.

HERMAN: And that's what Wal-Mart wants to hear. Steve Nave is the general manager for Walmart.com.

Mr. STEVE NAVE (General Manager, Walmart.com): It's great for markets like New York where Wal-Mart doesn't have a strong physical presence. So online, we're able to access customers in all markets.

HERMAN: And retailers know nothing lures online shoppers like free shipping. Sucharita Mulpuru is an online analyst with Forrester Research. She estimates cyber sales this holiday could jump 16 percent from a year ago.

Ms. SUCHARITA MULPURU (Vice President, Forrester Research): Consumers say time and time again they'll switch retailers if there is a free shipping offer. It's a very, very important piece of the equation of what makes a Web store successful.

HERMAN: Without it, online retailers lose sales. More than half of shoppers say they're likely to drop an order without free shipping, according to e-commerce firm ComScore. And Wal-Mart sees online as a place to grow. While the world's largest retailer had global sales of $103 billion in the last quarter, sales at stores open for more than a year in the U.S. have actually slumped over the past year.

With limited space to grow in suburban and rural areas there are more than 3,700 stores in the U.S. - Wal-Mart is looking to open smaller stores in urban centers like New York City. That may take years. This holiday, it can compete right now on the Web.

But there, Wal-Mart is not the biggest. That title goes to Amazon. Last year, Wal-Mart and Amazon fought a price war over books. This year, the battle continues. But this time over shipping.

Craig Berman is Amazon's vice president for communications.

Mr. CRAIG BERMAN (Vice President, Global Communications, Amazon.com): We will be matching those offerings, including on items under $25.

HERMAN: He points out that purchases on Amazon over $25 already qualify for free shipping year round.

And other retailers have their own incentives. Target announced free shipping for over 800,000 items ordered online for shoppers who spend more than $50. Best Buy offers free delivery for high-definition televisions over a thousand dollars.

The shipping offers have become so competitive and complicated, websites like FreeShipping.org and FreeShippingDay.com now track them.

But when Wal-Mart weighs in on free delivery, the holidays shift from the hottest toy or the must-have electronic gadget to how consumers can get the most out of their holiday dollar.

Ms. MULPURU: Any war, any price war like this, the big winner is the consumer. So, you know, as a customer, I got to say great. You know, I mean, we're - you know, you just can kind of sit back and wait for the best deal to happen.

HERMAN: But a win for consumers can result in a big loss for stores.

Ms. MULPURU: As a retailer, I mean it's definitely a bloodbath that's going to affect profitability.

HERMAN: All of that price cutting during the holidays can make it hard for retailers to survive. Remember Circuit City?

For NPR News, I'm Charlie Herman in New York City.

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