How Amazon and Walmart’s next-day shipping could bust your budget

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Free next-day shipping could make a shopper out of you.

Amazon says the cost of free one-day shipping for Prime members ate into its third-quarter profits — but shoppers should be aware that no-cost speedy delivery can also take a toll on their wallets.

Amazon announced in June that it would offer free one-day delivery nationwide for Prime members, who pay $119 per year, with no minimum-purchase threshold.

Plenty of other retailers are awooing shoppers with fast or free deliveries: Walmart WMT, -0.03%  has free “NextDay” delivery on 220,000 commonly purchased items. Sam’s Club, owned by Walmart, introduced free same-day pickup nationwide on orders of 15 items or less. Etsy ETSY, +1.49%   has said it would help sellers offer free shipping on orders of $35 or more, in addition to boosting free-shipping items in search results.

But consumer psychologists say you should think twice before clicking buy, as the “free shipping” option and instant gratification will make you even more likely to spend.

“Next-day delivery causes shoppers to buy more items, and to buy items more often from the retailers,” said consumer psychologist Bruce Sanders, author of the book “Retailer’s Edge.”

Walmart debuted free two-day shipping on $35-and-up orders in 2017. Competitor Target TGT, -0.81%  also offers free two-day shipping at the $35 minimum and announced it would debut $9.99-per-order same-day delivery of 65,000 items. Meanwhile, non-Prime Amazon customers get free regular shipping on eligible items totaling a $25 minimum. (Amazon introduced Prime two-day shipping in 2005.)

Walmart customers must hit a $35 minimum on eligible items in order to receive the free next-day shipping. What if your bill only comes to $30? Sanders said it will encourage you to reach the free-shipping minimum. It may sound counter-intuitive, but spending that extra $5 can make you feel like you’re getting a discount. Shoppers, consumer psychologists say, love anything with the word “free.”

“People always like to get things faster,” Peggy Sue Loroz, a consumer psychologist and professor of marketing at Gonzaga University in Spokane, Wash., told MarketWatch. “They start thinking, ‘What else can I throw into this basket? Oh, we’re kind of getting low on shampoo. The kids are going to need new socks.’” That list could go on and on.

Free shipping is a big incentive for click-happy consumers. Nearly eight in 10 people cite free shipping as a factor that would make them more likely to shop online, according to the latest Walker Sands Future of Retail Report. And 54% of people under 25 ranked same-day shipping as their top purchase driver.

Another study by the marketing company Retention Science concluded that people actually choose free shipping over a dollar discount. They may see it as a more lucrative perk, and it makes their online shopping experience more seamless, just like “one-click” shopping.

Free shipping makes online shopping more seamless. And if you change your mind after buying something, that’s no problem, Loroz said. “I can return this to a Walmart store and I don’t have to go through the hassle of trying to return an item by mail. That makes me more likely to do that kind of impulse buying.”

There may be a downside to buying something that lands on your doorstep the next day, or later the same day. Research suggests that looking forward to the arrival of a purchase can increase enjoyment of that experience. The binge viewing experience has now come to shopping. “If you do wait a bit for it, you treasure it more — as long as it’s something distinctive,” Sanders said.

Of course, shoppers are likely to be buying more everyday items like toilet paper or printer cartridges from Walmart — not exactly luxury or “distinctive” goods for which they might savor the wait, Sanders says. But believe it or not, impulse or “emotional” shoppers also like to buy essentials as well as luxury goods, according to a study in the Journal of Consumer Research. That includes everything from toilet and bleach to garbage bags and Clorox.

Shares of Walmart and Amazon have been up 28% and 17% year-to-date, respectively. That’s compared to a 15% gain for the Dow Jones Industrial Average DJIA, +0.65%  and 20% increase for the S&P 500 Index SPX, +0.43%  .

(Quentin Fottrell contributed to this story.)

(This story was originally published May 15, 2019 and updated on Oct. 25, 2019.)