Most customers believe that when shipping is free, it is truly free. I recently met someone on the bus who insisted that shipping was free. In practice, that is never the case. It just means that the shipping is built into the price of the product already and that the vendor has accounted for shipping. In other words, the item has been marked up already to factor in the shipping costs.
For a retailer, free shipping is a very important consideration. According to the results of one survey, around 55% of shoppers will abandon a shopping cart due to being intimidated at the cost of shipping. So for retailers, the psychological effect of making customers see free shipping is very important. It can lead to lower rates of shopping card abandonment and the possibility of higher sales.
Like all other things in life, there is nothing that is truly free. That does not mean of course that online retailers do not offer discounts. They are able to pass on the costs of savings to consumers due to the lack of store space, superior buying power, a superior logistics chain, and other areas for cost savings.
That also underscores a brutal reality. Unlike many other markets, where there are a handful of players or an outright monopoly, retail is a very competitive market where margins are very thin. That can be a win, for the consumer at times.