Amazon.com Inc. 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-commerce 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.
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. 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.
After forcing both free and fast shipping on the e-commerce industry it dominates, Amazon's latest moves are instructive. 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 on Thursday added that Prime delivery speeds got faster from 2021 to 2022 and are improving further this year."Getting things to people same-day or within a certain number of hours doesn't seem to be first and foremost anymore" at Amazon, e-commerce consultant Chris McCabe said.
Indeed, shoppers who do not subscribe to Prime get free standard shipping on Amazon orders over US$25. Walmart Inc WMT.N and Target Corp, which have delivery subscriptions of about US$100 per year, offer free shipping on orders above $35 for non-members.
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