In the next 17 months, it expects 10% of its B2B customers will be transacting on the web, an executive says.
The free shipping program has doubled the number of participating merchants.
It’s been a busy first 100 days for ShopRunner, the free shipping alternative to Amazon Prime, and there’s much more to come in 2011, says Mike Golden, president of ShopRunner, part of e-commerce technology provider GSI Commerce Inc.
ShopRunner will announce tomorrow four new retailers participating in the program that offers consumers free, two-day shipping for $79, the same fee that Amazon.com Inc., No. 1 in the Internet Retailer Top 500 Guide, charges for its similar Prime program. Those retailers are web-only electronics retailer Newegg Inc., No 12 in the Top 500 Guide, and apparel retailers The Timberland Co., No. 436, Lord & Taylor and Helly Hansen.
They bring to 64 the number of merchants signed up with ShopRunner, Golden says, more than double the number ShopRunner announced in early December and four times the 15 retailers signed up at the program’s public launch Oct. 5. Among the retailers participating are The Sports Authority Inc., No. 205 in the Top 500 Guide, drugstore.com Inc., No. 46, PetSmart Inc., No. 281, Borders Group, No. 194, and the GNC retail chain operated by General Nutrition Centers Inc.
A consumer who signs up for ShopRunner gets free shipping and returns across all the participating retailers, and Golden says the program will become increasingly attractive as more retailers participate.
“We think we can sign up millions of the best online shoppers in the next 12-18 months who today spend billions of dollars, and focus their spending on ShopRunner retailers,” he says. He would not disclose how many consumers have signed up for ShopRunner or any details of how much they have purchased.
For Newegg, ShopRunner provides a way to introduce its brand to consumers who shop at such major retail chains as PetSmart, Sports Authority and Borders, says Newegg vice president of marketing Bernard Luthi. He says it also puts the e-retailer in a better position to offer the free shipping offers online consumers increasingly expect—and to compete with Amazon Prime.
“Amazon has done a very good job with their Prime program of creating a perception among consumers of the value of a subscription-based free shipping program,” Luthi says. “This is just an expanded version of a Prime program that lets the consumer use it not only at Newegg but at other key retailers. It begins to level the playing field.” Amazon has not said how many consumers subscribe to Amazon Prime, but Lazard Capital analyst Colin Sebastian estimates that number at 5 million.
Golden says it appears consumers who sign up for ShopRunner will use it 15-20 times a year, based on use patterns to date, and that frequency of use will increase as more retailers participate. He estimates that consumers most likely to sign up with Amazon Prime order from Amazon at least eight to 12 times a year, citing focus group evidence that consumers expect to pay about $10 for shipping each time they place an online order. “Based on that, if you use it eight times a year, you break even,” Golden says. “We’re seeing behavior almost double that, based on our existing partners.”
Although the free shipping offer might tempt subscribers to use ShopRunner on small orders, cutting into profit margins, Golden says participating retailers have not seen the average order value go down on ShopRunner orders. Overall, he says retailers are finding the average ticket ordered through ShopRunner is within 5%, plus or minus, of the retailer’s average order value. He considers that significant, considering that bulky high-ticket items, like exercise equipment from Sports Authority, would not be eligible for ShopRunner shipping because of the expense of delivering such items.
Luthi says Newegg has not decided which of its items will be eligible for ShopRunner shipping when it goes live with the service in April, but expects it will be most of the e-retailer’s SKUs, with only heavier items most likely excluded.
ShopRunner has offered a free, 30-day trial since its launch, and that will continue, Golden says. “We think it’s a great value and it takes 30 days for someone to fully understand how ShopRunner can make a difference in a consumer’s life,” he says.
In fact, he says, participating retail chains will use that free trial offer more aggressively in stores in the second half of the year, leveraging the free shipping program in a way that a web-only retailer like Amazon cannot. He says the retailers, which he did not name, will offer free shipping via ShopRunner if a consumer wants an item not available in the store, or wants to customize a product or buy a gift and have it sent directly to the recipient. “If somebody buying a gift goes to a store to check out a product and feel it, why take the product home and send it to the recipient when you can have it sent by the retailer? It’s a great, great integration of ShopRunner that multichannel retailers can offer,” Golden says.
Also in the works is an iPhone app that will let a ShopRunner subscriber—including potentially one shopping in a store that competes with ShopRunner retailers—use her phone to find an item she’s considering in the store at the e-commerce site of a ShopRunner merchant and order it for free home delivery. That app should be available in the middle of the second quarter, Golden says.
Golden says 30 merchants are now live on ShopRunner, and that it typically takes a retailer 4-8 weeks to get the service up and running. Retailers fulfill the orders themselves after subscribers sign into their ShopRunner accounts. ShopRunner has not disclosed how it charges participating retailers.