Who holds the cards in the “free shipping” game?

The major package carriers (UPS and FedEx) have made clear to their retail customers that their pricing will need to go up for holiday 2015, to help cover the growing costs of so-called “free shipping” offers, late shopping deadlines, and so forth. The question is: Who pays? Here’s my point of view from a recent RetailWire discussion:

There is no such thing as “free shipping,” no matter how aggressvely the service is pushed by e-commerce and omnichannel retailers. Somebody ends up paying for shipments that are too close to shopping deadlines like Christmas, or too bulky in the first place. So it’s understandable that the big carriers (UPS and FedEx) need to think harder about the impact on their own shareholders.

The question becomes whether retailers have any negotiating leverage against the two giant carriers, or whether they are willing to pass along costs to their customers even in the form of higher prices (so they can continue to offer “free shipping”). There will be a lot of back-and-forth between retailers and delivery companies before agreements are reached, so the initial volley by UPS and FedEx may not be the last word.

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