PayPal announced today that Levi.com, Aeropostale.com, SportsAuthority.com, and a select group of other online retail shops are participating in a test to provide free two day shipping to any customer who pays with PayPal. This move enables these merchants to better compete with Amazon’s Prime, which offers free 2-day shipping to all of their members.
Free shipping provides a competitive advantage in a world where consumers can easily compare the total delivered cost of a purchase across multiple online/mobile retailers.
However, unlike Amazon Prime, or competing services like ShopRunner, the PayPal test does not require customers to pay a membership fee to receive the free shipping benefit, they simply have to use PayPal to pay for their purchase. “The Test”, as PayPal is referring to it, is whether the promotion will drive enough increase in net new transactions, with high enough associated transaction fees in order to justify the cost of the shipping benefit.
With more than half of digital commerce for retailers occurring over the mobile channel, the demand for expedited delivery will continue to grow, and these types of tests will help shape how the cost of immediacy is absorbed and/or passed onto the consumer.
