Free shipping is a marketing tactic used primarily by online vendors and mail-order catalogs as a sales strategy to attract customers.
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Online sales model
Internet vendors benefit from a simplified sales model as compared to traditional brick-and-mortar stores. By storing goods remotely at a warehouse location and shipping goods directly to a consumer, significant transportation needs are eliminated both on the part of the vendor (shipping goods to stores) any by the consumer (traveling to stores). Additionally, near universal access to the Internet means that a relatively few warehouse locations can compete with a market without having to deal with amounts of real-estate.
Shipping and Fees
The simplified business model provides potentially lower costs or higher profit margins for remote vendors. The 'up front pricing' model attracts customers with low up-front prices reflecting the lower cost of goods to the vendor with less overhead. The vendor would then add the cost of shipping, and any other applicable fees to the order before processing. Since the vendor typically makes the shipping arrangements, it is entirely possible that the cost of shipping passed on to the consumer will not be the same as the cost of shipping borne by the vendor. Some online vendors use this as a source of revenue, further increasing profits or allowing the vendor to advertise even lower up-front prices. (The classic joke here is the "free car" worth $20,000 that has a $30,000 shipping and handling fee)
Free Shipping Day
"Free Shipping Day" was created and has run since 2008. One day in the holiday season (in 2010, this day was December 17th), companies such as Toys "R" Us and J. C. Penney participate by offering free shipping. These merchants are featured on the official Free Shipping Day website. There were 1,750 participating merchants in 2010. ComScore estimates that shoppers spent more than $942 million on Free Shipping Day, 2010, a 61% increase over the previous year.