Retailers that failed to ramp up their holiday season PR back in October should take some advice from Pink Floyd:

“No one told you when to run, you missed the starting gun.”

Pink Floyd – “Time”

Retail’s Big Three – Walmart, Amazon, and Target – triggered the starting gun on the holiday season before Halloween. And based on what they announced, offering Black Friday deals is not enough to compete for shoppers’ dollars in what is shaping up to be the first-ever $1 trillion holiday shopping season. The Big Three are going beyond a “save with merchandise” theme to stress “we’ll make shopping easier” — with favorable returns and shipping.

Should we now call this the on-demand holiday shopping season? Consider these developments from the Big Three:

Target and Walmart Come out of the Gate Early

On October 23, both Target and Walmart announced expansions of their online/offline shopping perks in a clear move to get a jump on the holiday shopping.

Walmart said it would expand two-day shipping to the entire Walmart marketplace beginning November 1. (Previously, this service was not available to products purchased from third parties on the Walmart marketplace.) In addition, starting in mid-November, Walmart is making it possible to return to Walmart brick-and-mortar stores products purchased through its marketplace. So long as shoppers spend a minimum of $35, they will qualify for free two-day shipping for products purchased online from both Walmart and from third parties operating on the Walmart marketplace.

While Walmart opened up its services for the holidays, Target doubled down on its own. Target announced free two-day shipping with no minimum purchase or REDcard membership required from November 1-December 22. (Target usually requires shoppers either use a REDcard or spend a minimum of $35 to qualify.) Target also announced expansion of its drive-up service in which shoppers can order online, drive to Target, and have their purchases delivered to their cars within about one hour.

Both Target and Walmart are clearly leveraging their physical network of stores – perhaps Target more aggressively so. As Brian Cornell, Target’s CEO, said at a briefing, “Our stores are at the center of that strategy. It gives us great agility and speed to meet the needs of customers.”

And Scott Hilton, Chief Revenue Officer, Walmart eCommerce U.S., wrote in a blog post, “With 90 percent of Americans living within 10 miles of a Walmart store, we think this is going to be a real game changer for our customers.” Ironically, Walmart is following an approach that Amazon has been using already – as we noted on our blog, Amazon has been making it possible for shoppers to return products via Kohl’s stores for months.

Amazon Refuses to be Left Behind

You didn’t think Amazon was going to let Target and Walmart have their way, did you?

In November, Amazon upped the ante with a big announcement: free shipping with no minimum purchase required – a perk reserved usually for Prime members. Free shipping started November 5. No cut-off date was announced, but the window will likely close December 22.

Given Amazon’s reach and reputation for efficient delivery, this news upstaged Target and Walmart. Amazon leaning on a key competitive advantages – efficient delivery and low prices – makes sense at a time when brick-and-mortar stores account for 80 percent of holiday sales. Amazon lacks the physical infrastructure that Target and Walmart possess, but the company knows online commerce like nobody’s business.

The news, coming so soon after Target’s and Walmart’s announcements, also underscores how far the bellwether brands are willing to go to compete for holiday shoppers.

As Moody’s Investors Service Lead Retail Analyst Charlie O’Shea wrote in an email to Retail Dive,

Amazon’s announcement this morning that it was escalating the shipping “arms race”: by offering free shipping for everyone, not just its Prime members, for a limited, but undisclosed, time this holiday season is yet another example of the steps retail “heavyweights” such as Amazon, Walmart, Target, etc. will take to continue to expand market share, and they will use every weapon in their arsenal to accomplish this.

These developments raise a number of questions, too: 

How Intense will the Pace Get?

Obviously free shipping drives up costs and puts a strain on any retailer. As Charlie O’Shea wrote, “Free shipping is one of the easiest promotions to execute for a retailer, and is certainly popular among consumers, however it is a very costly initiative to undertake. In Amazon’s case, shipping costs for FYE 2017 totaled almost $22 billion, with around $7.4 billion in Q4, and the LTM [last twelve months] through Q32018 stands at around $26 billion against LTM non-AWS revenue of around $198 billion.”

As we noted earlier this year, Walmart struggled to handle spikes in online demand during the 2017 holiday season. So how will these holiday features affect margins? We’ll know when Amazon, Target, and Walmart announce quarterly earnings that take into account holiday sales.

How Will Other Retailers Be Affected?

How hard will businesses such as Macy’s get hit? Macy’s is taking a more traditional holiday shopping approach by promoting Cyber Monday and Black Friday deals while also featuring pop-up stores in a bid to make its physical stores more attractive. It’s not that Macy’s is underselling online – far from it. In fact, Macy’s is offering shoppable experiences on Instagram and Pinterest in addition to deals found on its website. But offering more liberal shipping might be too much for a business that has fought hard to bounce back from hard times. Will Macy’s customers be lured away by aggressive free shipping offers, though?

What Is the Future of Black Friday?

One thing is certain: Black Friday and Cyber Monday, while important touchstones, no longer dominate the holiday shopping season. The most influential brands are moving the start date each season. In recent years, we saw big retailers begin to turn Black Friday into a multi-day event, including sales on Thanksgiving. People grouse about the holiday season beginning too soon – but shoppers continue to respond to holiday enticements. Will we reach a point when the increasingly on-demand nature of the holiday season eventually makes Black Friday extinct?

Let’s see how shoppers respond to free shipping. 

Saul Delage

Saul Delage

VP Growth