Amazon and other online merchants who utilize so-called free delivery to develop customer loyalty are scrambling to prevent it from eroding profitability as prices rise and e-commerce declines.
According to Reuters, companies are increasing rates for speedier service, boosting minimum purchase requirements, and making other measures that push more costs to consumers who are already struggling financially.
“The days of free delivery are numbered,” said Ken Morris, managing partner at Cambridge Retail Advisors.
It’s no secret that most businesses raise product pricing to compensate for free shipping. Yet, according to the report, rising delivery costs and product inflation make the service unsustainable, as the likelihood of a recession threatens to dampen already-weak online buying.
The industry, where nearly three-quarters of e-commerce companies offer some sort of free shipping, is rethinking the financial cost of habituating customers to free shipping as retail margins are contracting and shipping rates for United Parcel Service, FedEx, and the U.S. Postal Service reach record levels.