By offering totally free shipping for online purchases during the holidays, Wal-Mart Stores Inc. (WMT) has unveiled a strategy in the battle for e-commerce business that may become a standard for other retailers.

The combination of the world's largest retailer setting a precedent in terms of depth of offerings and suggesting it may follow with other free shipping deals creates a major competitive pressure for retailers -- for this holiday season and beyond. Wal-Mart on Thursday announced it will provide free shipping for more than 60,000 online items during the holidays without the need for a minimum purchase or subscription plan.

The move comes as other retailers at least mull over the prospect and may help expedite the process.

"Shipping is clearly an element of the customers' decision, and we need to be competitive in all those elements," Kohl's Corp. (KSS) Chief Executive Kevin Mansell said in an interview with Dow Jones Newswires. "We have not formalized our marketing strategy, but we plan to be competitive."

Kohl's is already offering free shipping for all of its merchandise "periodically" during the holiday season, Mansell said.

Amazon had set the online standard with its popular Prime program, which allows repeat customers to receive free shipping on most purchases for an annual fee of $79. Prime has been so popular that a group of retailers like Toys "R" Us Inc. and Barnes & Noble Inc. (BKS) recently teamed up to introduce a competitive shipping program called ShopRunner.

Now some a growing number of retailers are moving to free shipping this holiday season, as well as having periodic free shipping promotions year-round.

Apparel retailer L.L. Bean Inc., for example, is currently offering free shipping and handling for its standard delivery service in the U.S. through Dec. 20.

"For the largest retailer in the world to lay down the gauntlet makes everyone in retail have to think about how what they offer compares," said Noam Paransky, retail strategist at Kurt Salmon Associates. "I would say at this moment retailers are evaluating just how economically they can provide something, or something similar, to what Wal-Mart is doing," which also includes free returns.

Free shipping has been undergoing "an evolution" that started when these promotions were first offered on Cyber Monday, the first Monday after Thanksgiving, which is a big online sales day, said Andrew Lipsman, an analyst at ComScore Inc. (SCOR), an e-commerce analysis firm.

"At this point, there is a building expectation for free shipping," Lipsman said. "If retailers don't get in the game they risk losing consumers to their competition."

Some 41% of online retail transactions included free shipping, a recent ComScore study showed, and 55% of shoppers said they would abandon their cart if free shipping was not offered.

There is certainly incentive for retailers to at least step up their free shipping efforts, given how important online buying has become. Nontravel related e-commerce sales in the U.S. for this year were $99 billion through the end of the third quarter, or about 7% of overall retail spending, ComScore said. The amount is more than double online sales' share from six years ago and continues to show growth, including for brick-and-mortar retailers.

Macy's Inc. (M), for instance, said on Wednesday that online sales for its macys.com and bloomingdales.com sites rose 24% in the third quarter compared with the year earlier. Overall sales grew a comparatively tepid 6.6%, although in-store sales still make up the lion's share of brick-and-mortar retailers' revenue.

Wal-Mart's website is already a very popular online destination. In the third quarter, the retailer's online site averaged 37 million visitors, up 13% from the year before, according to ComScore. The number places Wal-Mart third behind Amazon.com Inc. (AMZN) and Apple Inc. (AAPL), including its iTunes store.

But retailers also have to consider the economics as they push onto the Web. While many have built distribution centers devoted to filling online orders, which lowers costs, there are still charges for things like running the centers, shipping and processing. And until now, retailers have largely avoided eating those costs. They were passed along to customers in the form of shipping fees.

But with consumer demand still a bit tepid because of the uncertain economy, retailers may have to rethink what is a significantly growing, and therefore, very important business for them.

-By Karen Talley, Dow Jones Newswires; 212-416-2196; karen.talley@dowjones.com

(Scott Morrison contributed to this report.)
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