Facebook Pinterest Search Icon SourcingJournal_horiz Tumbler Twitter Shape photo-camera graph-trend Shape latest-news icon / user

Amazon Sets the Pace When It Comes to Free Shipping and E-Commerce is Adapting

Consumers have come to expect free shipping from online retailers, thanks in no small part to the pervasive allure of Amazon Prime, and a new hierarchy is forming in e-commerce to compensate, according to a study released by inventory management specialists, OrderDynamics.

In its most recent study of 1,748 retailers in the United States, Australia, Austria, Canada, France, Germany and the U.K., OrderDynamics found that more retailers are starting to offer free shipping. Nearly 74 percent of retailers engaged in e-commerce in 2018 offered standard free shipping with a minimum purchase—compared to 66.8 percent that did so in the year prior.

Of those retailers offering free shipping, 67.2 percent did so on purchases $74 or under, with the average required minimum purchase amount being $60. Canadians enjoy the lowest minimum basket size for free shipping at $48.99 USD while U.S. consumers had to shell out 30 percent more for free shipping with a $63.75 minimum. Consumers in Germany and Austria pay the most for free shipping with $87.34 minimums.

The minimum purchase threshold a retailer chooses can also say a great deal about what the business is competing against. OrderDynamics was able to identify two “peaks” in the data that suggest differing strategies among e-commerce retailers when it comes to free shipping.

“The first peak at $0-$24 represents retailers competing with Amazon.com’s free shipping threshold (non-Prime) of $25 USD or more. The highest threshold in the $50-$74 range is set just below Amazon Prime’s original price point of $99 USD,” the study noted.

OrderDynamics suggests that retailers using this threshold have kept their free shipping minimums below the yearly value of an Amazon Prime membership in order to prevent consumers from being persuaded into a membership just to avoid shipping costs. This is supported by the fact that the minimum basket value in the United States increased 14.5 percent to $63.75 after Amazon increased its membership price by 20 percent.

It remains to be seen whether retailers will raise their minimum free shipping thresholds to go along with this year’s Prime price increase, but its possible that would be moving in the wrong direction considering the popularity of free shipping.

Additionally, a retailer’s sector has much more impact on the availability of free shipping than the size of the chain. Retailers in the DIY/auto/industrial sector only offered free shipping 41 percent of the time, followed by home furnishings at 42.5 percent and electronics at 51.9 percent. Free shipping adoption for all other sectors fell within a much higher range of 72.3 percent to 88 percent.

“Given that these retailers often provide very large, heavy, complex, or fragile merchandise—free shipping may be an extremely expensive offer,” OrderDynamics suggested.

However, when it comes to apparel, shipping comes easier and with lower thresholds for free options.

In general, fashion retailers offered free shipping 80.3 percent of the time at a below-average minimum basket value of $59.01. Online footwear retailers offered free shipping 84.5 percent of the time, the highest rate of any sector and required only $50.68 minimums on average—right below the typical cost of a pair of sneakers. Health and cosmetics boast both the highest rate of free shipping adoption, 88 percent, and the lowest minimum basket value of $39.72.

An interesting divergence occurs among retailers, typically in the luxury sector, with much higher minimum shipping thresholds. The range of “high” minimums observed in the study went from $600 to the study-wide high of $1190—suggesting an entirely different playing field for these retailers.

“With a strong enough value proposition, Amazon does not necessarily anchor the minimum basket value for retailers,” researchers offered.

More from our brands