Why Are Retailers Increasing Their Free Shipping Thresholds?

Imagine that you’re browsing through a website and you hit it off with a product. Next to your perfect product, lies a small line shouting “minimum spend of $$$ for free shipping”

There are no guesses to your next move - abandon the cart and move on! The best part about being an eCommerce seller is that you are an eCommerce buyer as well. 

Retailers however are walking away from the notion that every customer is delighted by free and fast shipping. 

According to a recent report from Wall Street Journal, retailers have increased free shipping thresholds to $64 in 2023 from $52 in 2019. In the same report, 47% of merchants said they spend more than 10% of an order’s total value on free shipping. 

Retailers Increase Shipping Thresholds in 2023: 

Macy’s Increases Threshold by 96% 

It’s difficult to keep track of thresholds as Macy’s keeps on changing them. Macy’s minimum threshold for free shipping was $25 in 2019. As of 2023, Macy’s website says the threshold is $49. Moreover, according to their benefits page, there is an extra $10 surcharge for orders placed outside of the US. That’s almost a 100% threshold increase over 3 years! 

Saks’s 5th Avenue Introduces $100 Shipping Threshold Without Guarantee

Sak’s 5th avenue went from no shipping charge to $100 shipping threshold for free standard shipping in 2023. Buyers now have to pay $9.95 for orders under $100 before taxes. Additionally, they also have a $20 charge for premium shipping (2-3 days) and a $30 charge for express shipping (1-2 days) .

Moreover, it seems that despite paying these charges there is no guarantee that your product will arrive on time. Their shipping policy says “Actual delivery dates are not guaranteed and are subject to factors beyond our control, including delays by the carrier or delivery company, supply chain issues, weather, traffic, and other factors”

Abercombie & Fitch Raises Bar From $75 to $99

In 2019, Abercombie & Fitch had a minimum free shipping threshold of $75. In 2023, they’ve upped the limit to $99. This new threshold is calculated after all discounts, leaving little room for buyers to benefit from gift cards and discount codes. 

Moreover the website calls out that this is a limited time offer, implying there are plans to increase the threshold further. 

Neiman Marcus Goes from $0 for Free Shipping to $50 

Neiman Marcus introduced a $50 charge for free shipping in 2023. Their website enlists extra shipping surcharges for orders that don’t meet this limit ranging from $10 for 3-5 day delivery and $35 for same day delivery. Interestingly, despite these surcharges, their policy says “Delivery times are not guaranteed”. 

Amazon Prime started the trend of 2 day free shipping and until now everyone has been trying to catch up. So why increase thresholds on order now? Let’s explore what is driving retailers to  shift from the free and fast shipping mentality.  

Why Are Retailers Increasing Thresholds in 2023? 

Global Container Shortage: 

Container shortages have shot up container prices to $3500 from pre pre-pandemic rates of $1800. China produces and houses most global containers. During the pandemic many countries canceled orders from China, creating a global shortage. As demand stabilized with limited supply, container prices rose.   

Parcel Carrier Costs on the Rise Including High Fuel Surcharges:

Thanks to rising inflation, parcel carriers have seen their operating costs increase significantly during 2022. As a result all major carriers such as FedEx, USPS and UPS have raised average general rates by  5.5% to 6.9%. Carriers also increased fuel surcharges based on the U.S. Retail Motor Gasoline Prices. Fuel charges and general rate increases have hit retailers and sellers, making free shipping harder and costlier. 

Amazon Announces Shipping Surcharges 

Struggling to cut costs, Fulfillment By Amazon (FBA) announced a slew of surcharges such as Storage Utilization metric, long term storage fees, restock limitations, and fees hike. These surcharges have further driven up shipment cost for retailers and sellers. 

Slower Destocking Due to Excess Inventory

Wholesalers and retailers are still grappling with stockpiles of goods built up during the pandemic. Despite promising consumer demand, destocking is not happening as rapidly. 

Merchant wholesale inventories in May were still 4.1% higher than in May 2022, driving storage costs and rentals further. 

Tighter retail thresholds and returns policies mean lower margins for sellers. Sellers need to optimize for every penny across every shipment now more than ever. Check out how Cahoot’s innovative peer-to-peer fulfillment network and next generation shipping software helps you achieve Amazon-like deliveries at much lower costs and minimize your returns.