Free Delivery Boosted Consumption In The US And Dragged Down Retail Business.

For large US retailers,

Door-to-door has been normalized.

This is good news for consumers, but for investors, it is obviously not the same thing.

In the just concluded holiday shopping season, Taghit (Target), WAL-MART (Wal-Mart) and Amazon have increased free door-to-door service options, making more products available for free door-to-door service.

In addition, these retailers have abolished the minimum consumption threshold for this benefit.

However, as more and more American consumers regard free delivery as their right, retailers are unable to make profits by opening up e-commerce services.

Analysts say this dilemma can be clearly reflected in the holiday season earnings report released a few weeks later.

"For most companies, the cost of trying to provide fast and free services is really too high," says Steve Osburn, director of supply chain at Kurt Salmon, a retail consultancy. Jia Siming said: "for most companies, the cost of trying to provide fast and free services is too high." (Salmon)

For some retailers, this will erode profits.

Due to the escalation of competition between retail stores and Amazon, the delivery link has become a key area of competition, so they have invested heavily in building.

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Although free door-to-door shopping is a popular marketing tool in holiday shopping season, retailers seem to rely more and more on this trump card in 2014.

According to data from comScore, an industry data tracking agency, the proportion of online purchase orders free of freight reached 68% in the third quarter of 2014, a 44% increase over the same period last year.

Amazon said this week that its free shipping activities during the holiday shopping season helped consumers save $2 billion.

Most of these freight free activities are obtained through Amazon's Prime membership.

The annual payment of $99 can become a Prime member, and most goods can be delivered free.

Amazon refused to disclose the data of the previous year, nor did it disclose how much Prime consumers would spend compared to ordinary consumers. This data has some reference value for understanding the impact of Prime members on Amazon's revenue.

Sucharita Mulpuru, an online retailing analyst at Forrester, an American market research firm, estimates that Amason will lose $1 billion to $2 billion a year on Prime delivery fees in the US, Sucharita.

Other retailers including Taghit and WAL-MART are also free from the minimum threshold of free door-to-door to attract consumers.

Jia Siming's data show that more than half of the companies surveyed have removed the threshold of free delivery during the holiday shopping season in 2014, while only 5% of the companies providing free shipping services during the same period last year.

High cost

However, analysts say that the promotion of consumers is often accompanied by high costs.

Amazon's pport costs increased by 32% in the first nine months of 2014, compared with 29% in 2013.

This increase in consumer subsidies may provide more justification for investors to abandon Amazon's stock.

According to the S & P 500 index, the US stock market gained more than 11% in 2014, while Amazon's share price fell by 22%.

Retailer Taghit said in November last year that growing network sales were forcing its profit margins to be under pressure, mainly due to high pport costs.

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In general, Taghit also provides free delivery service for its membership card holders throughout the year.

Analysts expect Taghit's sales to be US $74 billion in the current fiscal year ended January 31, 2015, while Internet sales accounted for 2.5%, about $1 billion 850 million.

In a recent research report, Wolfe Research said that the proportion of Taghit's network sales increased by 1% and its profit margin dropped by 5 basis points.

The company said that the cost of free shipping promotions in holiday shopping season had not had a substantial impact on its fourth quarter results, and it was also expected that its profitability would be enhanced through the development of network business.

WAL-MART has not yet disclosed the profitability or delivery costs of its e-commerce business.

The company said in October last year that it expects to invest heavily in the electricity sector in the next 18-24 months, and that it is inevitable that the Department will run a deficit when building warehouse centers and using other expenses to boost sales growth.

The company expects that as of January 2015, the electricity sector's revenue will reach $12 billion 500 million, and will grow at a rate of 30%-40% in the next three years.

"EasyPost CEO CEO Streebin Jarrett," the most popular entity retailing stores, is still losing money because of their inability to control delivery costs.

If WAL-MART can't save shipping costs, I don't know which entity retailers can do that.

No other choice

Retailers have no choice but to adapt.

Huge retail sales in the US have been growing slowly, but the scale of e-commerce has increased rapidly.

In the third quarter of 2014, the US internet sales increased by 16% compared with the same period last year, while the total retail sales increased by only 4%.

In order to offset the high pport costs, American retailers were more dependent on their physical stores in 2014, which is also known as "omnichannel".

This strategy involves picking up orders from consumers directly from nearby stores, rather than going to remote warehouses to pick up goods, which can reduce pportation costs or encourage consumers to go directly to nearby retail outlets.

Take WAL-MART, there are more than 7 kinds of goods that can be freely brought to the store.

At the same time, Amazon is also rapidly building its storage center near the US metropolitan area in order to achieve faster delivery service.

In addition, the company also provides a more rapid delivery service Prime Now in New York, which usually delivers goods to buyers within one hour.

Oliver Chen, an analyst at Cowen and Company, an investment bank, said: "everyone's profit margins are decreasing, but it doesn't matter, because you have to compete in this kind of competition.

Whether you like it or not, this is the new mode of consumption.