What the numbers say: The cost of shipping a 10-poun/k.d package from New York to Chicago via UPS Ground, including surcharges, increased from $8.71 in 2018 to $13.79 this year, based on ShipMatrix data. The typical minimum order quantity to qualify for free shipping increased from $52 (2019) to $64 (2023). As opposed to 2-3% when delivering goods to physical stores, shipping costs account for 10-15% of e-commerce firms' revenues, according to 47% of retailers, who allocate over 10% of an order's total value to shipping costs. Relevance: To combat rising shipping costs, major shops like Macy's, Saks Fifth Avenue, Neiman Marcus, and Abercrombie & Fitch are raising the minimum spending threshold for free shipping. As retailers review their logistics strategy to maintain profitability, this change signals a shift away from prior campaigns intended to drive online sales through low or free shipping. More data: Amazon's introduction of free shipping through its Prime membership in 2005 set a benchmark for online customers, with 62% of respondents saying they would only purchase from a merchant with this option. Retailers like Macy's, Abercrombie & Fitch, and Saks Fifth Avenue boosted their free shipping thresholds to $49, $99, and $100, respectively, as a result of recent pricing increases by UPS and FedEx of 5.9% and 6.9%. |
