Sustainable shipping not a priority for retailers: report

Australian retailers are scaling back free delivery and returns as delivery costs increase, affecting retail investment in sustainable shipping.

According to the ‘State of Shipping 2025’ report from Shippit, many retailers are finding it difficult to keep up with the rising delivery costs, and the shift to sustainable shipping has been slower than expected, especially during the time of mandatory emissions reporting for large businesses.

While 50% of Australian consumers say sustainability influences their purchase decisions, only 12.4% of Australian retailers promote green delivery on their websites. In New Zealand, the figure is more than double at 27.8%

“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,” said Rob Hango-Zada, Co-Founder and Joint-CEO of Shippit.

“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.”

While customer expectations continue to grow, cost pressures are forcing many retailers to scale back return offerings. Just 14% of Australian retailers now offer free returns, down from 49% in 2018. The ease of returns is also declining, with only 58% offering simple, customer-centric return processes, compared to 97% in 2018.

“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.”

Although delivery costs are high, investment in sustainability is slowly beginning to shift, with over one-third of retailers now prioritising eco-conscious shipping and returns, and 24.1% working with sustainable carriers.

When asked what investments retailers were making with regards to sustainability in 2025, sustainable packaging ranked top (70.7%).

“Sustainability is no longer a nice-to-have. It’s becoming a consumer expectation. From packaging to delivery methods, customers are asking ‘what impact does this have?’ Retailers who can offer options like carbon-neutral delivery or minimal packaging, and communicate that clearly, build stronger brand affinity and trust,” said Mareile Osthus, co-founder and CEO, Humii.

Still, sustainable shipping remains a challenge. While many carriers are experimenting with EVs and alternative routes, only a minority have made significant shifts, and none of the surveyed carriers currently offer carbon-offset shipping. Infrastructure costs and limited retailer willingness to pay green premiums remain major roadblocks.

Shontelle Nicholas, General Manager, DotCollective, said, “As environmental concerns continue to influence purchasing behaviour, integrating sustainability into logistics is evolving from a value-add to a strategic imperative.”

Behind the scenes, carriers are responding to the demand for speed and precision. The biggest operational pressure cited by carriers was last-mile delivery costs, whether it’s rising labour and fuel costs, congestion in cities, the need to improve delivery density, or maintaining standards as volume and expectations increase, the report says there are a myriad of factors contributing to this. Carriers are investing to meet rising expectations: 100% are increasing their fleet capacity, with 57.1% scaling up by 1–9%, and 43% expanding by more than 20%. Many are also adopting new technologies such as real-time tracking, returns optimisation and AI-powered route planning to boost efficiency and performance.

As retailers navigate rising delivery expectations and tighter margins, almost two-thirds (62%) have identified AI and emerging technologies as the most significant trend for the year ahead. While adoption was cautious in 2024, confidence has grown rapidly, with more retailers recognising AI’s ability to improve delivery reliability, speed up fulfilment and drive operational efficiency.

Shippit’s report said the shift signals a broader move towards leaner, tech-enabled operations, balancing evolving customer expectations with the ongoing need for speed, sustainability and cost control.

Download the full State of Shipping 2025 report here.

Image credit: iStock.com/gorodenkoff