Free shipping as we knew it is over
Kevork Djansezian/Getty Images
- Most online shoppers have come expect free shipping, according to a recent survey.
- But retailers have to figure out ways to offset rising delivery costs while keeping customers happy.
- Companies are raising their minimum thresholds to qualify for free shipping, according to the WSJ.
Americans love free shipping, but they may have to spend more money to get it, according to a new report by the Wall Street Journal.
Retailers are trying to balance rising shipping costs with continued expectations for free delivery. Their options include raising the minimum purchase required to qualify for free shipping, slowing delivery times, and negotiating prices with carriers.
The first option seems to be gaining the most traction, according to the Journal. It says companies like Macy's and Abercrombie & Fitch have raised their free shipping minimums online.
Insider did a quick check of several popular retail sites. H&M offers free shipping on orders over $40. Uniqlo's minimum threshold is $99. On Target's website, customers need to buy at least $35 worth of merchandise to qualify for free 2-day shipping.
The Journal cites data from Narvar, a company that provides a "post-purchase" technology platform for retailers. Narvar said that the average minimum to qualify for free shipping has risen to $64 this year, according to data from 48 retailers, compared to $52 in 2019.
Free shipping "wasn't going to last, and finally the party is over," Satish Jindel, president of shipping data company ShipMatrix, told the Journal.
Amazon Prime may have kicked off the free-shipping trend
While it's unclear when exactly free shipping became ubiquitous among e-commerce retailers, the rise of Amazon Prime — and the free shipping that came with a monthly subscription — likely played an outsized role in the trend as companies strived to compete with Amazon, according to a 2017 research report from Insider Intelligence.
Amazon launched the membership program in 2005.
"Amazon Prime's free two-day shipping has led to an industry paradigm shift," the report said. "Online retailers — small and large — are increasingly offering the perk to keep from losing customers to the behemoth marketplace." Insider Intelligence is a sister company of Insider.
Carriers like UPS, FedEx, and DHL have faced higher costs recently, including wage hikes and fuel prices, which has translated into higher costs for retailers to ship items. Some retail companies have also begun to charge customers to ship back items they want to return.
But free shipping has become a fact of life for many Americans. That means it would be difficult for retailers to suddenly revoke it.
According to data from shipping technology firm Shippo, nearly two-thirds of Americans said they wouldn't buy something online without free shipping.
But nearly half of customers also said they would be willing to meet minimums to qualify — a positive signal to retailers that raising thresholds and nudging customers to add more items to their carts may be an effective way to offset rising costs for their businesses.
"Having some type of free shipping option is now a permanent expectation," Krish Iyer, vice president of strategic partnerships at shipping software company Auctane, told Insider earlier this year.