Perk of online shopping is vanishing as businesses grapple with tariffs costs

That once-reliable perk of online shopping — free shipping — is starting to vanish as retailers grapple with mounting costs tied to new tariffs and rising delivery fees.

Modern Picnic, a brand that sells fashionable lunchboxes resembling handbags, has doubled the amount customers need to spend to qualify for free shipping. Shoppers must now hit a $300 threshold, up from $150, or pay a $15 shipping fee.

“It was a tough decision,” Ali Kaminetsky, founder of Modern Picnic, told the Wall Street Journal.

“We just had to offset these increases somewhere, and shipping seemed to be one of the more logical places.”

The $15 charge still doesn’t cover the company’s full shipping expense, but it helps soften the financial blow of escalating delivery costs and new import tariffs, Kaminetsky noted.

This year, the US imposed a 10% duty on imports from most countries and a 30% tariff on goods from China, with the potential for more increases in the near future.

While big-box players like Walmart haven’t yet modified their shipping policies, they’ve acknowledged plans to pass some of the cost increases on to customers through price hikes.

Others are leaning on suppliers to help share the burden or relocating manufacturing operations out of China to mitigate exposure.

For smaller online businesses, adjusting free shipping thresholds has become a more immediate solution to protect margins without directly raising product prices.

“Retailers don’t know how the backlash is going to be if you just show tariffs right there,” said Anisa Kumar, CEO of retail-tech firm Narvar. Instead, she explained, brands 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.”

Data from Narvar shows the average minimum spend required to qualify for free shipping rose to $103 this year, up sharply from $82 in 2023.

Footwear brand KURU has also reworked its shipping policies in light of the added costs. Customers now need to join a loyalty program to access free delivery, or else pay $8.99 at checkout.

Even with the fee, the company is losing money on each shipment — average costs are over $10 per package, according to Chief Financial Officer Matt Barnes.

Still, Barnes said the shipping charge is helping offset the impact of new tariffs. However, the change appears to be affecting shopper behavior.

“We’ve seen our conversion rate go down in recent weeks,” Barnes said. “We suspect that it is the shipping that’s causing that.”

And that’s no surprise, according to shipping industry expert Satish Jindel, president of ShipMatrix.

“A lack of free shipping is one of the biggest reasons people abandon a cart,” Jindel said. “To not have free shipping with any threshold is a recipe for a serious decline in sales.”

The pressure to offer free shipping has been mounting since Amazon launched its Prime program in 2005, offering unlimited two-day delivery for a flat annual fee.

Competing retailers followed suit, despite rising delivery expenses that have steadily eaten into profits.

The average cost to ship a package — including surcharges — now stands at $12.50, up from $9.53 in 2019, ShipMatrix data shows. This year, both UPS and FedEx raised their average rates by 5.9%.

Still, not every company sees customer resistance. Lovevery, a premium toy subscription service, decided to test the waters by doing away with free shipping after polling customers.

“Eliminating free shipping was one of the least objectionable things we could do,” said Roderick Morris, the company’s co-founder and president.

“We eliminated free shipping for many of our products in the US in late April, and so far we haven’t lost many customers as a result,” he told the Journal.