10/06/10

Retailers join forces to challenge Amazon on shipping

The new ShopRunner program offers free shipping and returns for $79 per year.

Thad Rueter , Senior Editor

Bidding to match—and surpass—the successful free shipping program of Amazon.com Inc., 15 retailers and GSI Commerce Inc. have launched ShopRunner, a service that offers consumers free two-day shipping and free returns. Amazon’s Prime loyalty program does not cover free shipping when items are returned.

Consumers pay $79 per year for the benefits. Retailers such as The Sports Authority Inc., Toys 'R' Us Inc. and Wilsons Leather already are taking part. GSI says such merchants at Borders, Barnes & Noble, Ice.com Inc. and CSN Stores LLC are among the two dozen other online retailers scheduled to participate.

Consumers can click on the free shipping offer at checkout on the sites of participating e-retailers to learn more about ShopRunner and join the program. Retailers oversee shipping of their products but share with ShopRunner data about member purchases. Consumers also can go to ShopRunner.com to shop from retailers. Consumers can share their memberships with other people in their households.

Citing ShopRunner’s access to a broad range of inventory, Colin Sebastian, a stock analyst with Lazard Capital Markets, says the new service likely will enjoy an advantage over Prime, the similar program offered by Amazon, No. 1 in the Internet Retailer Top 500 Guide. ShopRunner will have more than five million items available by year’s end, GSI says. Amazon says members of its Prime program can get free shipping on “millions” of items.

Prime has about five million annual subscribers, Sebastian estimates. “We believe that members of the loyalty program (such as Prime and ShopRunner) are inclined to spend significantly more than typical online consumers,” he says. “As such, ShopRunner should provide e-commerce companies with a competitive alternative program.”

Online home furnishings retailer CSN Stores LLC plans to start shipping through the ShopRunner program in the first quarter of 2011, says Niraj Shah, the company’s CEO and co-founder. The retailer was attracted not only by the shipping options, but because retailers still can rely on their own distribution infrastructure, unlike Prime, Shah says. CSN is No. 61 in the Internet Retailer Top 500 Guide.

GSI, which spent $5 million to develop ShopRunner, introduced the service now to take advantage of the run-up to the holiday shopping season and because of the clear role free shipping has played in Amazon’s growth, says Fiona Dias, GSI’s executive vice president of strategy and marketing. “One of the secret sauces is Prime,” she says.

By year’s end, GSI expects 40 retailers that together operate 240 web sites will be taking part in ShopRunner. Half of the ShopRunner merchants will be GSI clients at the end of 2010, she anticipates, though she predicts the number of non-clients will steadily grow in 2011. 

Dias did not detail how GSI-owned Shop Runner Inc. and retailers will divide revenues and shipping costs.

So far, most consumers who have signed up for the service have done so through the retailer web sites, she says. She would not say how many consumers have enrolled but says the total is more than GSI expected. Besides retailers’ promoting ShopRunner through their own checkout pages, GSI will promote the program through Facebook and Twitter.

Eventually, the ShopRunner.com site could become more of a shopping hub for consumers. The site includes a Marketplace tab, now in beta phase, where consumers could receive exclusive offers from ShopRunner merchants, along with accessing accounts for purchase and shipping information useful for returns. “If consumers want to return a product, they go to their ShopRunner accounts, which show all your orders, and then print out prepaid shipping labels from that site,” Dias says.

This week’s introduction of ShopRunner is what GSI considers a soft launch. “It basically means there’s limited retail partners and product assortment to start,” a spokeswoman says.

 

Topics:

Amazon, Amazon Prime, Barnes & Noble, Borders, CSN Stores, free shipping, GSI Commerce, Ice.com, Sports Authority, Toys 'R' Us, Wilsons Leather

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