Shipping Costs Doubled for Small Retailers—And Free Shipping Is Why It Hurts

Jenni Shields paid $2.93 to ship an average order eight years ago. This year, her local post office in Kansas charges her nearly $6 per package—more than double—and she says it's pushing her business into the red.

"I am losing money at this point, and I've really taken a huge hit this year," Shields, owner of Evie Pearl Handmade, told CNBC. Her shop sells bows, quilted headbands and other accessories. "I feel like it's just been this slow increase up [in shipping costs], and I feel horrible."

The numbers tell the story of a slow squeeze. Last year, an average shipping label for her products ran about $4.50, Shields said. The jump to nearly $6 this season caught her off guard. She discovered the new rate at her local Kansas post office.

Why are holiday surcharges hitting now?

As the holiday season approaches, major U.S. shippers—UPS, FedEx and the U.S. Postal Service—have all instituted their annual holiday surcharges, with prices varying by package type. For small and medium-size businesses, the timing is brutal. They must now decide which costs to prioritize and which to cut, all while trying to turn a profit during their most important selling weeks.

The deeper worry for smaller retailers isn't the surcharge itself. It's competition. They fear they can't match retail giants like Walmart and Amazon, who keep offering free delivery that customers have come to expect.

"I can't compete with Amazon on the free shipping. I can't do that. I can't afford that," Shields said. "I'm seeing so much of my percentage that's supposed to come back to me and my family being put towards the shipping costs."

In short: small retailers absorb the rate hikes because their customers won't accept paying for delivery.

What protects the big players?

Nick Vyas, a professor of clinical data sciences and operations at the University of Southern California's Marshall School of Business, told Inc. that large retailers are shielded from market volatility by their sophisticated networks. Their high shipping volumes let them lock in long-term, fixed-rate contracts—something a shop like Evie Pearl Handmade simply cannot do.

"Strategic moves like early inventory purchases, supplier negotiations, and sourcing changes significantly impact how costs are passed to consumers," Vyas said. "Big-box retailers have the capital to execute these strategies, while small businesses often do not. As a result, smaller merchants are forced to absorb dynamic rate hikes, peak-season surcharges, and tariff volatility in real time."

The gap is structural, not seasonal. Scale buys fixed rates; lack of scale buys exposure to every price swing.

What's the takeaway for small merchants?

The math Shields describes is stark. A seller whose per-package cost has climbed from $2.93 to nearly $6 over eight years faces a choice between raising prices, charging for shipping, or eating the margin. Every option carries risk—customers trained on Amazon's free delivery tend to abandon carts when shipping fees appear at checkout.

For now, Shields and merchants like her are absorbing the difference, watching the share of revenue meant for their families go to carriers instead. Unless shipping rates stabilize or consumers shift their delivery expectations, this holiday season will keep forcing small retailers to subsidize a perk that only the giants can afford.

The takeaway in plain words: the surcharge doubled Shields' cost per package, but free shipping is what's actually threatening her business.