Free Shipping Just Became Increasingly Costly

Posted on January 4, 2019

It’s no surprise to see shipping rates from the primary delivery services rise with the beginning of a new year. UPS and FedEx, for example, have implemented an average rate hike of nearly 5 percent each year since 2010. A similar increase on standard shipping across all major carriers is either active already or will be within the first month of 2019.

But it’s not necessarily those increases that are most likely to threaten the ability of e-commerce stores to offer free shipping. Instead, it’s the rising surcharges and fees on specific services that may cripple the luxury consumers are increasingly viewing as an expectation.

For example, UPS is raising rates by roughly 9 percent for its SurePost program according to the Motley Fool. If a shipment is heading to an area that is difficult to reach, rates may rise by upwards of 30 percent. The SurePost program operates in conjunction with the USPS to allow for faster delivery in the final stretch. An increase is also expected for FedEx’s SmartPost deliveries, which is a similar arrangement to SurePost. And the USPS is increasing its Parcel Select rates, which will go into effect in late January.

According to Spend Management Experts, these are the most common shipping methods used by e-commerce businesses to offer free shipping. It has become part of the push for retailers to compete with Amazon, but the increases may not make that feasible much longer.

If an e-commerce store views a free shipping option as mandatory, increasing product prices is certainly one way to combat the changes. However, you’d better be certain this won’t upset your customers, and that seems unlikely for most brands.

A more reasonable option to consider is minimum purchase amounts for free shipping. This can potentially help increase order value, and you can set the minimum at a level your brand can afford. Still, if you’ve been offering free shipping without a minimum purchase amount, it’ll be difficult to turn back now.

Meanwhile, Amazon is positioning itself to expand its delivery fleets drastically in 2019. That’s because the retail giant can afford it now and will save money long term. 

Competing with Amazon hasn’t been a level playing field for some time. A hit to the ability to offer free shipping is just one of the latest examples. It’s also yet another example of why shifting the focus toward customer lifetime value continues to grow in importance for e-commerce brands. That means building strong relationships with your customers, which ultimately won’t be trumped by a slight change in shipping costs.