Fast Shipping Is Killing Your Margins
September 4, 2025
Fast Shipping Is Killing Your Margins: learn how last-mile costs, soaring expectations, and tech gaps erode profit—and how to win them back.
Cost Burden Shifted
Last-mile delivery is the money pit nobody wants to own: it now eats up roughly 53% of total shipping costs, which means carriers and retailers are bleeding margin earlier in the chain.
Consumer Expectations Soared
Speed became a weapon and a liability. Roughly 85% of shoppers say a poor delivery experience will stop them from buying again, so brands keep funding faster options even when those choices destroy margin.
Rising Operational Costs
Driver pay and fuel swings aren’t mythical villains — they’re line-item killers. Per-mile driver pay climbed materially (recent industry analyses put year-over-year growth in the high single digits), and ATRI data show fuel pushed total trucking costs sharply (with fuel a large part of a 21% jump in 2022; excluding fuel, costs still rose about 12%). Translation: labor + fuel = margin pressure.
Tech’s Mixed Impact
Half the industry has tried to fix this with tech: route optimization adoption is hovering around the 50% mark, but adoption alone didn’t mean instant savings. Integration and execution gaps left many firms waiting for ROI that never arrived.
Margin Recovery Strategies
There are levers that work when companies stop worshipping speed. Dynamic pricing and delivery-window fees in pilots have delivered double-digit margin upticks in some cases—McKinsey notes pilots producing roughly a 10% rise in gross margin—so price the premium, don’t silently subsidize it. Combine that with smarter regional inventory and you claw profit back.
Final Thought
Fast shipping is a drug with a high relapse rate. Make trade-offs intentionally: price delivery, cluster fulfillment, demand smarter promise windows, and stop pretending speed is free. Do the math in public, publish realistic SLAs, and force carriers to earn same-day fees — your P&L will thank you. Stop treating free or instant as gospel—profit matters. Start charging for certainty, not hype. Do it.
