E-COMMERCE giant Amazon and other online retailers who use so-called free delivery to cultivate customer loyalty are scrambling to keep it from draining profits as costs climb and e-business contracts.
They are adding fees for faster service, raising minimum purchase requirements and making other changes that shift more costs to consumers who are struggling with financial issues of their own, reports Reuters.
'The days of free delivery are numbered,' Ken Morris, managing partner at Cambridge Retail Advisors, said of the fast-changing retail marketing tool.
Retailers are beginning to look more like some airlines, which charge for better seating, transporting luggage and also restrict use of frequent flyer points, Mr Morris said.
It is an open secret that most retailers raise product prices to subsidize free shipping. Still, product inflation and soaring shipping costs are making the service unsustainable as the prospect of recession threatens to wallop already-flagging online spending.
With retail margins shrinking and shipping rates for United Parcel Service Inc, FedEx Corp and the US Postal Service hitting record levels, the industry where nearly three-quarters of e-commerce companies offer some sort of free shipping is rethinking the financial cost of habituating shoppers to free shipping.
Retailers' top priority is lowering shipping costs, with speed a close second, said Lee Spratt, CEO of DHL eCommerce Solutions America, which provides logistics services.
Retailers from Amazon to dog treat seller Einstein Pets and ubiquitous apparel chains like Zara, Abercrombie & Fitch and Foot Locker are drawing the line at losing money on a service consumers have come to expect.
That is translating into shipping cost reduction goals of up to 25 per cent, said Mingshu Bates, chief analytics officer at consultancy AFS Logistics.
After forcing both free and fast shipping on the e-commerce industry it dominates, Amazon's latest moves are instructive.
The online retailer, which recently hiked the annual Prime subscription price by US$20 to $139, is now offering 'free' same-day shipping for Prime members in at least a dozen US cities, including Los Angeles, Chicago and Philadelphia. There are strings attached, however, as the service is free only on orders of at least $25, and costs $2.99 when orders fall below that.
At the start of March, Amazon also raised the minimum threshold for free Prime shipping from its struggling online grocery business to $150 from $35 and added charges of $3.95 to $9.95 for orders below the new limit.
Amazon CEO Andy Jassy in February said the company is streamlining costs across the business and that shipping speed would not be a casualty of its efficiency push. A spokesperson added that Prime delivery speeds got faster from 2021 to 2022 and are improving further this year.
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They are adding fees for faster service, raising minimum purchase requirements and making other changes that shift more costs to consumers who are struggling with financial issues of their own, reports Reuters.
'The days of free delivery are numbered,' Ken Morris, managing partner at Cambridge Retail Advisors, said of the fast-changing retail marketing tool.
Retailers are beginning to look more like some airlines, which charge for better seating, transporting luggage and also restrict use of frequent flyer points, Mr Morris said.
It is an open secret that most retailers raise product prices to subsidize free shipping. Still, product inflation and soaring shipping costs are making the service unsustainable as the prospect of recession threatens to wallop already-flagging online spending.
With retail margins shrinking and shipping rates for United Parcel Service Inc, FedEx Corp and the US Postal Service hitting record levels, the industry where nearly three-quarters of e-commerce companies offer some sort of free shipping is rethinking the financial cost of habituating shoppers to free shipping.
Retailers' top priority is lowering shipping costs, with speed a close second, said Lee Spratt, CEO of DHL eCommerce Solutions America, which provides logistics services.
Retailers from Amazon to dog treat seller Einstein Pets and ubiquitous apparel chains like Zara, Abercrombie & Fitch and Foot Locker are drawing the line at losing money on a service consumers have come to expect.
That is translating into shipping cost reduction goals of up to 25 per cent, said Mingshu Bates, chief analytics officer at consultancy AFS Logistics.
After forcing both free and fast shipping on the e-commerce industry it dominates, Amazon's latest moves are instructive.
The online retailer, which recently hiked the annual Prime subscription price by US$20 to $139, is now offering 'free' same-day shipping for Prime members in at least a dozen US cities, including Los Angeles, Chicago and Philadelphia. There are strings attached, however, as the service is free only on orders of at least $25, and costs $2.99 when orders fall below that.
At the start of March, Amazon also raised the minimum threshold for free Prime shipping from its struggling online grocery business to $150 from $35 and added charges of $3.95 to $9.95 for orders below the new limit.
Amazon CEO Andy Jassy in February said the company is streamlining costs across the business and that shipping speed would not be a casualty of its efficiency push. A spokesperson added that Prime delivery speeds got faster from 2021 to 2022 and are improving further this year.
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