Target Corp halved the size of online orders eligible for free shipping to $25, undercutting Amazon.com Inc and traditional rival Wal-Mart Stores Inc as it focuses on its online business.
Amazon offers free shipping on orders worth at least $35 and Walmart.com $50.
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Target said on Monday the new threshold comes into effect immediately.
Shipping has become a key promotional tool in the escalating war between retailers, with companies increasingly offering free shipping throughout the year instead of just during the holiday shopping season.
Target's digital offerings include Target.com and Cartwheel, a mobile app for coupons.
Brick-and-mortar retailers are moving into online retailing, offering additional benefits such as in-store pickups.
Online orders accounted for about 2.5 percent of total revenue of both Target and Wal-Mart in the year ended Jan. 31.
This translates into about $1.83 billion for Target, based on the average analyst estimate for its total revenue, way below the $12.2 billion Wal-Mart reported for the period.
Target said it planned to open two more distribution centers in the United States to support its online orders.
Target's shares were little changed at $76.85 in late morning trading on the New York Stock Exchange. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Ted Kerr and Kirti Pandey)