Australian retailers cut free returns as delivery costs rise

Australian retailers are reducing free returns and delivery incentives amid rising costs, according to the recently released State of Shipping 2025 report from commerce delivery platform Shippit.

The report analyses hundreds of millions of deliveries. It gathers insights from thousands of retailers, customers, and carriers, highlighting a widening gap between consumer expectations and the practical realities businesses face in the current economic climate.

Changing industry dynamics

Australian retailers are responding to rising delivery expenses and a shifting global trade landscape by recalibrating their approach to shipping and returns. Rob Hango-Zada, Co-Founder and Joint-CEO of Shippit, said, "We're witnessing a recalibration in retail. The post-COVID delivery boom normalised fast, free, and flexible delivery, but rising costs, supply chain uncertainty, tariff pressure and heightened consumer expectations are forcing a rethink. Retailers are now weighing up what's economically sustainable, not just what's desirable. Some are scaling back returns and delivery incentives, while others are reengineering their networks altogether. What's clear is that delivery is no longer invisible; it's a visible, influential part of the customer journey. In 2025, fulfilment is a balancing act — between speed and cost, convenience and sustainability. The retailers who manage that tension best will earn trust, loyalty, and long-term growth."

Delivery cost shifts

Delivery prices for standard and express services are on the rise, with standard delivery increasing from AUD $10.26 in 2024 to AUD $10.39 in 2025, and express delivery moving up from AUD $14.24 to AUD $14.69 within the same period. However, same-day delivery costs have declined, decreasing from AUD $18.26 in 2024 to AUD $17.39 in 2025, and showing a broader fall from AUD $31 in 2018. This reduction is attributed to maturing fulfilment networks and enhanced operational efficiencies.

"Demand for faster, more flexible delivery is only accelerating, especially for same-day and even sub-hour options," said Will Glover, Head of Commercial at Uber Direct ANZ. "We're helping retailers meet those expectations by tapping into our on-demand network, reducing delivery times without the need for costly infrastructure upgrades. As customers prioritise speed and convenience, same-day is moving from a premium service to a practical solution. That shift is helping to normalise faster fulfilment across categories and customer types."

Returns and loyalty

The financial pressure on retailers is shifting the landscape for returns policies. The offer of free returns has dropped significantly, with just 14% of Australian retailers providing free returns in 2025, compared to 49% in 2018. Similarly, 58% of retailers now facilitate easy returns such as prepaid labels and flexible drop-off methods, a decrease from 97% reported in 2018. The report notes that while 92% of customers are more likely to return to a brand offering easy returns, many retailers are struggling to maintain those features amid increasing costs.

Local fulfilment initiatives

Retailers are increasingly transforming physical stores into fulfilment centres to enable faster, more localised delivery. The report indicates 21% of retailers are investing in ship-from-store capabilities, seen as a strategic response to global competitors.

"The gap between what consumers expect and what traditional retail infrastructure can deliver is widening, and fulfilment is where that pressure shows up first," said Ben Cook, Regional VP (APAC) at NewStore. "We're seeing more retailers rethink the role of the store, evolving it from a purely transactional space into a strategic hub for flexible fulfilment. The benefits are twofold: consumers enjoy more agile shipping options, and retailers can offer more inventory through omnichannel capabilities like endless aisle. The result is happier customers, lower costs, and increased revenue. Everyone wins."

Despite these investments, only 30% of Australian retailers offer click-and-collect services, compared to 44% in New Zealand. Some retailers see significant benefits from click-and-collect, particularly during peak periods.

"Click-and-collect is really integral for us, especially during peak season, when our customers really need flexibility and convenience. On average click-and-collect accounts for about 25% of our total online orders, and that peaks around peak gift giving times. Take Christmas, for example. Unfortunately sometimes the delivery window can be gone, but because click-and-collect is still available to our customers they don't miss out because of timing. It's valuable all-year-round, but particularly at that time period when the stakes are highest," said Ben Wapling, Head of Marketing and Digital at Intersport.

Sustainability and consumer demand

Half of Australian shoppers say sustainability influences their purchases, but only 12.4% of local retailers promote green delivery options online, compared to 27.8% in New Zealand. A third of retailers are now prioritising eco-conscious shipping and returns, with about a quarter working with sustainable carriers. However, significant sustainability shifts by carriers remain limited, and carbon-offset shipping is not yet offered by those surveyed. Infrastructure costs and a reluctance to pay premiums for green options remain substantial barriers.

International strategy

International markets remain a strategic focus, with 83% of Australian and New Zealand brands prioritising global expansion as a key objective for 2025. This is despite complications from new tariffs, especially those introduced by the US, as well as higher cross-border delivery costs. Many retailers are transitioning to Delivery Duty Paid (DDP) models to minimise friction for global customers who are often hit by unexpected customs duties.

Carrier adaptations

Carriers face operational pressures stemming from last-mile delivery costs, including rising labour and fuel expenses, urban congestion, and heightened expectations. All surveyed carriers are expanding their fleets, with 43% increasing capacity by more than 20%. Investments in technology such as real-time tracking, AI-powered route planning, and returns optimisation are underway to meet retailers' demands for speed and efficiency.

AI and technology focus

Artificial intelligence and emerging technologies have been identified as the top retail trends for 2025, with 62% of retailers signalling them as a priority to improve delivery reliability, speed, and operational efficiency. Key areas include delivery prediction, route optimisation, inventory visibility, and greater automation across the fulfilment and last-mile logistics processes. Retailers are also trialling personalised communication, advanced returns management, and cost recovery strategies as they seek to balance customer satisfaction against rising operational pressures.