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June 19, 2025
Should Eliminating Free Shipping Be a Tariff Offset?
Not offering free shipping has been shown to be a leading cause of online shopping cart abandonment rates, but some online sellers are eliminating the perk or making it harder to get to lessen the brunt of product price hikes.
A Wall Street Journal article noted that to offset the tariff impact, subscription educational toy seller Lovevery eliminated free shipping on all orders, handbag maker Modern Picnic raised the threshold on order size to qualify for free shipping, and orthopedic shoemaker KURU Footwear shifted to reserve free shipping only for loyalty program members.
Anisa Kumar, CEO of retail-technology provider Narvar, told the WSJ that retailers “don’t know how the backlash is going to be” if the tariff impact is largely reflected in higher sticker prices. Instead, companies are “trying to tighten up on lines like transportation and returns and things that are not as front-facing to consumers as that first shopping price,” she said.
Retailers in recent years have already been eliminating free shipping on orders or raising the threshold to qualify for free shipping to combat higher delivery costs. The average minimum-order threshold for retailers to offer free shipping jumped to $103 this year from $82 in 2023, according to Narvar.
However, free shipping has become an expectation for many consumers since Amazon introduced its Prime membership with two-day shipping in 2005.
A survey of about 1,000 U.S. consumers last year from Digital Commerce 360 and Bizrate Insights data found more than eight in 10 cited free shipping (81.3%) as their top priority when it comes to delivering their orders. More than a third (35.8%) said reasonable shipping fees are most important to them — if they aren’t getting free shipping.
A McKinsey survey of more than 1,000 U.S. consumers earlier this year found more than 80% saying they will still buy an item when delivery takes four to seven days, as long as that delivery is free.
Free shipping options also give shoppers confidence in making an online purchase without the in-store ability to try or touch a product. Retailers still offering free shipping with no minimum order size and no membership include Nordstrom, Sunglass Hut, Apple, Coach, Tory Burch, Lululemon, Zappos, Amoeba Music, Warby Parker, and Blue Nile.
According to a survey from ESW of about 1,000 U.S. consumers taken in late 2024, 60% will not absorb more than a 10% increase in pricing due to tariffs. Yet when asked what they like retailers to offer in exchange for higher prices due to tariffs, the top answer was free shipping, cited by 52%
Discussion Questions
Will online consumers respond more negatively to higher shipping costs or higher product prices?
What factors should retailers consider when deciding whether to eliminate free shipping, raise free-shipping thresholds, or increase shipping fees in response to rising tariff costs?
Poll
Loading …BrainTrust
Karen Wong
Co-Founder & CEO, TakuLabs Ltd.
Pamela Kaplan
Principal, PK Consulting
Scott Benedict
Founder & CEO, Benedict Enterprises LLC
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Retailers have to do something to balance the increased costs tariffs will bring. If they elect not to raise prices, then they need to make savings elsewhere or accept a hit on profit. It may seem tempting to sacrifice free shipping but the problem is that consumers expect it and Amazon (and other big players) are still offering it. Unless a retailer is in a very differentiated segment, there is a risk of driving customers away if free shipping is not offered at some level.
Yes! Unless you’re highly differentiated, competing against Amazon and other major players who maintain free shipping creates an immediate competitive disadvantage.
It’s almost gotten to the point where if a seller/retailer doesn’t have free shipping, it feels like a slight to the customer, or at best, is one more barrier being thrown up. Like you note, better be very differentiated to charge shipping.
The Law of Equivalent Experience States: “The best service standards anywhere are immediately expected everywhere.”
Amazon has set the fast, free delivery bar so high that it makes other retailers seem greedy or inept.
Seeing the shipping costs added at the end of the transaction is likely a major cause of cart abandonment.
And shoppers know that “free shipping” is not really free. It’s just hidden in the selling price. Maybe that’s why Wayfair has backed away from that in its ads.
I’d suggest that virtual retailers might adopt prominent flat-fee shipping policies – maybe “$2.50 for any delivery in any Zip code up to 25 lbs.” as a way to partially offset costs while communicating predictable value.
Agree James. The expectation has been set. Which is disappointing as more Amazon orders, from 3rd party sellers, now have added shipping fees. Even for Prime members. Since you expect free shipping as a Prime member, you often notice the shipping fee only once in cart. So even the setter of the expectation isn’t living up to the expectation.
Free shipping is already baked in as an expectation for American shoppers. And the McKinsey study shows the trade-off consumers are willing to make to keep it. Taking away a visible and much loved benefit to offset tariff costs, which may be a moving speed bump in the road, is way riskier in upsetting customers versus simply adjusting retail prices with a note, or adding a temporary line item.
— Removing a benefit= a hurt felt by consumers
— Adding shipping cost= adds a sunk cost if item needs to be returned. The “risk”/possibility of risk slows the decision process
— A ship cost on the front end needs immediate clarification if there is ALSO ship cost due/withheld on returns end
e.g Ninashoes charging $8.95 ship + a $9.95 for return. Consumers inherently see possible loss of $18.90 if the shoe doesn’t fit/isn’t right. Out $; own nothing.
–Higher price, if indeed from tariff & line itemed as such, could be more palatable.
The out & return ship costs would still need to be evaluated by consumer.
Should the tariff % change!!! in the future (either via supply chain or govt revision)…there is already a basis of transparency: the line item.
Retailers have collectively trained consumers to expect logistics to be invisible and costless, which benefits major players like Amazon. This is an example of loss aversion: when consumers encounter the removal of free shipping, they perceive it as a loss, even if the underlying costs remain unchanged. A $5 shipping charge on a $50 item feels more burdensome than a $55 item that comes with free shipping, even though both scenarios are economically equivalent.
Rather than eliminating free shipping altogether, savvy retailers should be transparent about the effects of tariffs. If necessary, they can introduce a temporary “trade adjustment” line item to inform consumers while avoiding the pitfalls of loss aversion. Companies like Keen (mentioned here last month) have successfully absorbed costs through their supply chain partnerships, rather than directly passing them on to their customers.
Shipping will stand out because it goes from Zero>…well, not zero; whereas a (particular) cost isn’t ingrained in people’s minds.
As for the idea of eliminating one to offset the other: there’s no logic in this, but anything that pushes us toward cost rationality should be welcomed.
No logic! No logic! No logic!
It’s very, very wrong. It’s also cowardice. Tell the people why you are raising prices. It has nothing to do with shipping costs.
thars what we need….less credibility.
Agree. Don’t build a 2nd fallacy on top of the 1st.
First being that “free” shipping actually exists! (cost is borne by someone, somewhere)
Both are moving pieces, tariff & shipping.
At some point shipping cost will go up… then do you become transparent?
Retailers can solve this by doing one thing: Give your customers a choice. Let them decide. Most reasonable customers understand that tariffs are/will cause prices to rise. It should come as no surprise to most consumers. However, how every retailer handles how these price increases are applied is an opportunity. Most everyone is going to be raising prices — even Walmart telegraphed concerns about tariffs – no retailer is impervious to this. So, the question for retailers is: How are you going to find the most effective way to do raise prices/preserve margin without disenfranchising your customers or being beat by competitors? Give customers a choice.
Tariffs, as we know, are just another tax that gets added on to “the cost of doing business”. This of course affects the gross margin – at the end of the day doing business is getting more expensive and every company or brand needs to decide what makes the most sense for them. We need to be strategic here, what is the goal? If it’s to continue to grow customers and sales then eliminating free shipping probably won’t help. Better off increasing prices or cutting elsewhere.
The tariff policy changes impact many different industries so it’s not a one-size fits all situation. For most, it’s simply the difference between a rock and a hard place. Slower free shipping options to lower costs, higher product prices and separate tariff line items during checkout are all going to be used. Which one will depend on the values of the customer base and whether there are concerns showing tariff costs transparently.
A retailer should evaluate how changes to shipping policies may affect customer buying behavior and overall sales volume. Whether eliminating free shipping or raising thresholds will reduce spending or cause customers to abandon shopping carts needs to be considered. Additionally, it’s crucial to assess how these changes will affect profit margins and whether the potential loss in sales could outweigh the savings from reduced shipping costs.
As I have written many times, shipping is not free. It is baked into the price and margin. If it is not included, then the retailer is foolish.
Tariffs are not a problem for retailers to solve. It is simply a tax imposed by the government, like a sales tax. If retailers are afraid tariffs will cause prices to rise too far, solve that problem. Don’t complicate the issue.
No retail pricing or shipping strategy exists in a vacuum; rather, it is shaped within a competitive marketplace. Several retailers offer free shipping as part of a paid membership program, and thus are unlikely to withdraw this key cornerstone of value in their program due to higher product costs. Given that, any retailer that withdraws their own free shipping offer would instantly become less competitive and make such a change at their peril.
The funny thing about ‘free shipping’ is that customers absolutley know (on some level) that it’s not free. They are either paying for it in the subscription price, or the selling price, or they know it’s coming out of the sellers margins. But ‘free’ just feels soooooo good and sooooo comforting. Amazon set the standard and expectation long ago and all of retail has been hemorrhaging margin $$$ ever since. A review of the free shipping threshold and the fees themselves need constant review whether we are operating under tariffs or not. With the right level of transparency, customers will understand when prices go up, and down, based on the ever shifting tariff scenario. Which hopefully will stabilize some day.
Amazon has a choice to add something to the price of each of the 5.5 billion items a year (2023) and to blast “free shipping”. Which will get them more customers?.
Amazon has the tech advantage they purposely built…digital dynamic pricing at sku level, and MUCH higher level P&L as cushion. They can also hide behind the marketplace partners, and not have to deal with pricing at all.
It was always about customer acquisition, and installing comfort into the ecomm equation. Now they’ve made it table stakes. Now it’s about customer acquisition AND retention. And everybody else has to manage their prices and margins to stay competitive. Nobody else has all the other profit buckets that Amazon has.