Recently, Amazon and other online retailers are struggling to cultivate customer loyalty from free shipping programs. However, the free shipping drains profits as costs surge. On the other hand, this becomes the reason why they add more fees for particular services like faster service. In addition, they also raise minimum purchase requirements. Furthermore, with some adjustments, they shift costs to consumers struggling with financial issues of their own. Managing partner at Cambridge Retail Advisors, Ken Morris argued about the fast-changing retail marketing tool.
He stated that the days of free delivery are now numbered. Now, retailers start to look more like some airlines. Airlines charge for better seating and transport luggage. With the same analogy, it restricts the use of frequent flier points. It is not a secret that most retailers now raise product prices, thus they can subsidize free shipping. However, the problem is there are still product inflation. In addition the shipping costs continue to soar. This makes the service unsustainable. Recession in this year is threatening.
Amazon’s free shipping used Pricey Prime subscriptions. The company also used fat profits from other businesses to manage its package delivery costs. Furthermore, many retailers do the same thing although they don’t gain as much. Currently, the retail margins are shrinking. Rates for UPS.N or United Parcel Service Inc, FedEx Corp (FDX.N) and the U.S. Postal Service hit record. Now these companies are considering about financial costs that become their burden due to free shipping program.
