The era of free shipping is over? Amazon, Asos and other retailers have adjusted their policies!

Amazon and other retailers are changing their "free shipping" services amid rising costs and falling e-commerce profits. They are adding fees for faster delivery services, raising minimum purchase requirements and making other changes to pass more costs on to consumers who are troubled by inflation.

“The days of free shipping are coming to an end,” said Ken Morris, managing partner at Cambridge Retail Advisors. He said retailers are starting to charge for better seats, transported luggage and limit the use of frequent flyers’ points, as some airlines do.

Free delivery becomes unsustainable

It’s an open secret that most retailers raise product prices to subsidize free shipping. However, with the prospect of a recession likely to hit already weak online spending, rising product prices and soaring shipping costs are making free shipping unsustainable.

Amazon uses free shipping as a marketing differentiator and uses its expensive Prime subscription service and fat profits from other businesses to cover its delivery costs, forcing other retailers to follow suit even if they lack Amazon's advantages.

Nearly three-quarters of e-commerce companies currently offer some form of free shipping, but the industry is rethinking the financial costs of getting consumers used to free shipping. Previously, Lee Spratt, CEO of DHL e-commerce solutions, said that retailers' first priority is to reduce shipping costs, followed by speed.

According to the report, from Amazon to pet food retailer Einstein Pets, as well as clothing chains such as Zara, Abercrombie & Fitch and Foot Locker, consumers are expected to spend more money for free shipping services. Mingshu Bates, chief analytics officer of consulting firm AFS Logistics, said this will help retailers reduce transportation costs by up to 25%.

Amazon's latest move could be a lesson for other retailers

Amazon recently raised the annual fee for its Prime membership by $20 to $139. The company currently offers free same-day delivery to Prime members in at least Los Angeles, Chicago and Philadelphia, but this service is conditional: only orders over $25 can enjoy free delivery, while orders under $25 will be charged a $2.99 ​​shipping fee.

In early March, Amazon also announced that it would significantly increase the free delivery threshold for Prime members of its troubled fresh food business from $35 to $150, and charge a shipping fee of $3.95 to $9.95 for orders below this threshold.

But Amazon CEO Andy Jassy said in February that the company was streamlining costs across its business and that shipping speeds would not be sacrificed in the drive for efficiency. A company spokesperson said Thursday that delivery speeds had increased from 2021 to 2022 and would increase further this year.

According to an August 2022 survey by industry research firm Digital Commerce 360, nearly three-quarters of the top 1,000 retailers in the United States offer free shipping on at least some orders, and 45% of them set a minimum purchase amount to enjoy this benefit.

It is worth mentioning that fashion retailers such as Amazon and Asos have raised the threshold for fast delivery, but other retailers have announced the complete cancellation of free delivery or increased product prices again.

Kelly Ison, CEO of pet food company Einstein Pets, said they were caught in a "dilemma." In order to maintain profits, the company stopped its free delivery service in mid-2022 and instead charged the same fee of $8. She also said: "We can't compete with Amazon."

Separately, Toronto-based United Filter Co. raised prices on its furnace filters so it can continue to offer free shipping on products sold through Amazon, Walmart and eBay.

Editor ✎ Nicole/

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