As the retail industry continues to grapple with the financial implications of offering free shipping, Amazon and other online retailers are making changes to their delivery services in order to keep costs from draining profits. According to Ken Morris, managing partner at Cambridge Retail Advisors, “The days of free delivery are numbered.” Retailers are beginning to look more like airlines, which charge for better seating, transporting luggage, and restricting the use of frequent flyer points. Most retailers raise product prices to subsidize free shipping, but with product inflation and soaring shipping costs, the service is becoming unsustainable. Amazon has used pricey Prime subscriptions and profits from other businesses to underwrite its package delivery costs, forcing other retailers to follow suit. Retailers are now looking for ways to reduce shipping costs, with speed being a close second. Lee Spratt, CEO of DHL eCommerce Solutions America, said retailers are aiming for a 25% reduction in shipping costs. Amazon has recently hiked the annual Prime subscription price by $20 to $139, and is now offering “free” same-day shipping for Prime members in at least a dozen U.S. cities. However, the service is free only on orders of at least $25, and costs $2.99 when orders fall below that. Additionally, Amazon has raised the minimum threshold for free Prime shipping from its online grocery business to $150 from $35 and added charges of $3.95 to $9.95 for orders below the new limit. The changes to free shipping services are indicative of the financial strain the retail industry is facing. With the prospect of recession looming, retailers are having to make difficult decisions in order to keep their businesses afloat. Sources: Reuters. (2019, March 24). Amazon, other retailers scramble to keep free shipping from draining profits. Retrieved from https://www.reuters.com/article/us-amazon-com-shipping/amazon-other-retailers-scramble-to-keep-free-shipping-from-draining-profits-idUSKCN1R50YV