Returns Are No Longer a CX Feature – They’re a Balance Sheet Liability
E-commerce returns have exploded in scale, and retailers are grappling with the cost. What was once a customer-friendly “free returns” policy is now being reined in: major brands are imposing flat fees or stricter rules. Industry data show this is no flash in the pan. For example, the National Retail Federation (NRF) and Happy Returns report finds 72% of U.S. retailers now charge customers for at least one return method, and nearly three-quarters of all stores levy some kind of return fee. In practice, major retailers have quietly added fixed costs to returns: Marshall’s and T.J. Maxx each deduct $11.99 per returned package, Macy’s charges $9.99 per return, and JCPenney and J.Crew roughly $8. In short, returns have shifted from being a cost of customer service to becoming a line item on the balance sheet.
- Industry Benchmarks: ~72% of retailers charge for at least one return method; nearly 75% of stores have return fees (NRF).
- Retailer Examples: Marshall’s/TJ Maxx – $11.99 per return; Macy’s – $9.99; JCPenney – $8; J.Crew – $7.50.
These figures mark a sharp change. Consumer shopping sites and news outlets report that many leading chains introduced return fees in late 2024/2025. ABC News (via ABC15) confirms that “J. Crew, Macy’s, JCPenney and more have fees for some returns on holiday gifts”. Similarly, a Money magazine analysis notes that over the past year “retailers have slowly been rolling back one of online shopping’s biggest perks: free returns,” as nearly three-quarters of retailers now charge for returns. These fees include shipping surcharges, restocking charges, and other handling fees, all aimed at recouping the hidden cost of returns.
Ecommerce Returns: Why Free-Returns Policies Broke at Scale
The U.S. online shopping boom has made ecommerce returns a massive operational burden. During the pandemic and beyond, consumers ordered more and returned more. According to the NRF/Happy Returns 2025 report, the average ecommerce return rate was 16.9% in 2024, as reported by the National Retail Federation, and is estimated to reach 15.8% of annual sales in 2025—roughly $850 billion of merchandise. The NRF report also notes that collectively, consumers returned products worth a staggering $890 billion in 2024. The average ecommerce return rate can vary significantly by product category, with clothing and shoes typically having higher rates. (For perspective, returns accounted for 10.6% of U.S. retail sales in 2020 and jumped to 16.6% in 2021.) Handling this torrent of returned goods has become expensive. In 2025, approximately 19.3% of all online sales are expected to be returned, making effective management essential for protecting profit margins and maintaining customer loyalty.
Returns impose multiple overlapping costs on retailers. Transportation and logistics are especially costly. As one analysis notes, each $100 returned item costs a retailer about $32 to process and resell. Retailers effectively pay twice to handle the same item: they ship it to the customer, and then pay again for the return transit and processing. Warehouse labor, inspection, and repackaging add more expenses. In the aggregate, the NRF estimates returns now cost “almost $890 billion each year” to U.S. retailers. Retailers are predicted to spend 8.1% of total sales on reverse logistics. Even that colossal figure likely understates the burden, since many returned items cannot be sold at full price. Returns often incur additional markdowns or liquidations, eroding margins further. In fact, studies show a significant share of returned merchandise (often cited around 10–25%) cannot go back to inventory at full value. The environmental impact from high return volumes also contributes significantly to carbon emissions and landfill waste, especially in fast fashion and electronics.
In summary, free returns became unsustainable once volumes grew large. Retailers report that the principal drivers of new fees are soaring carrier costs and the expense of reverse logistics. One supply-chain analysis observes, “Returns also drain resources because they require reverse logistics: shipping, inspecting, restocking, and often repackaging items”. Third-party logistics (3PL) providers can handle the entire order fulfillment process, including returns, to help streamline operations. The result is that retailers can no longer absorb returns as a marketing perk without jeopardizing profitability. As Happy Returns CEO David Sobie puts it, “Return policies and their overall process have transformed into a strategic touchpoint”, forcing retailers to modernize how they manage returns. A clear and generous ecommerce return policy, including a well-defined return window and specifying the purchase date, can increase sales without increasing the volume of returns. Retailers may also implement restocking fees to recover costs for large or costly items. Ecommerce return fraud is a growing concern, making it critical for online retailers to monitor customer returns closely. Many customers, especially online shoppers, review return policies before making online purchases, and making returns easy builds trust and encourages repeat business. Many customers prefer to return items in-store if a physical or brick and mortar store is available, which can enhance their shopping experience and lead to additional in store sales. Returns can be an opportunity for more business if handled well, as customers may return to shop again after a positive return experience, supporting customer loyalty and future sales. The evolution of return policies now trends toward a generous ecommerce returns policy, which is key to attracting potential customers and maintaining a competitive edge, especially during the holiday season when ecommerce sales and customer returns surge.
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See How It WorksReturns and Customer Satisfaction Are a Balance-Sheet Liability
For retailers (and Shopify brands), returns are a balance-sheet liability, not merely a customer-experience feature. Every return ties up inventory and triggers costs: outbound shipping credits to the customer, inbound transportation for the return, labor to sort and inspect the item, and restocking or writing it off. Among these, transportation is a “biggest expense”. As one logistics executive observes, retailers are seeing “about 20 to 25% more” of them charge for returns this year – explicitly as a way to recoup these mounting costs.
A key step in the ecommerce returns process is the return merchandise authorization (RMA), which allows retailers to manage and track returns efficiently. The RMA process often includes generating a return shipping label and ensures that each return is properly documented, helping streamline operations and improve customer satisfaction. The return process typically begins when the customer initiates return through an online portal or help form, making a seamless experience essential for customer retention. Implementing self-service online returns portals can reduce customer service workload and increase processing speed, while returns management software and returns platforms automate the process, including label generation, approval workflows, and inventory updates. Automation and data analytics further help solve operational challenges, flag return abuse, and provide flexible options for loyal and honest customers, ensuring that fraud prevention measures do not unfairly penalize good shoppers.
Returns also carry hidden capital costs. While cash may be refunded to the customer immediately, the item often requires new handling. Many returned products are not in pristine condition: they need relabeling, repackaging or even discounting. When managing refunds, offering alternatives like store credit instead of cash refunds can help prevent fraud and retain value. Industry analysis finds that processing returns adds both labor and operational expenses. Retailers are adapting by dedicating more resources to returns: NRF data show 49% of retailers plan to rely more on third-party logistics providers for returns, and 43% plan to hire extra seasonal staff to handle the volume. All of this indicates that returns impact inventory, headcount, and cash flow – hallmarks of a balance-sheet liability.
Key cost factors include:
- Reverse logistics costs: Inbound shipping, return shipping labels, and handling fees (often 20–30% of an item’s price).
- Labor and facilities: Sorting, inspection and repackaging by warehouse teams, plus administrative handling.
- Inventory recovery loss: A portion of returned goods can’t be resold at full price, necessitating markdowns or liquidation.
- Fraud prevention and overhead: Although not shopper-blame, retailers note return fraud adds to the cost base (roughly 9% of returns) and must be countered with systems or policies that balance fraud prevention with not penalizing honest customers. Data analytics can help identify serial returners while providing flexible options for loyal customers.
As a result, retailers are explicitly factoring online returns into margins. For example, one study reports that 40% of merchants cite operational costs of processing returns as a reason to start charging fees, and another 40% cite carrier shipping costs. In other words, return fees directly offset the very expenses incurred on the balance sheet.
Accurate product descriptions, high-quality images, AR/VR tools, and authentic customer reviews with real-life photos and videos are crucial in reducing returns, especially since fit-related issues account for approximately 67% of fashion returns. Leveraging these strategies, along with collecting and analyzing feedback on return reasons, helps retailers identify trends, improve product offerings, and enhance trust among potential buyers. Providing tracking information for return shipments and a hassle-free return process—something 58% of customers want—can significantly improve satisfaction and loyalty. Notably, up to 23% of customers who receive instant refunds will shop again immediately, and many expect their credit processed within five days. Clear and accessible return policies further enhance trust, satisfaction, and repeat business.
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I'm Interested in Peer-to-Peer ReturnsThe Role of Reverse Logistics
Reverse logistics is the backbone of ecommerce returns management, encompassing every step required to move products from the customer back to the online retailer. When a customer initiates a return, the reverse logistics process begins: items are received, inspected for quality, and processed for either restocking, refurbishment, or disposal. Depending on the retailer’s return policy, customers may receive a cash refund, exchange, or store credit—each requiring precise coordination behind the scenes.
For online retailers, a streamlined reverse logistics process is essential to meet customer expectations for a hassle free return policy. Shoppers today expect a smooth, transparent return process, whether they are seeking a replacement, store credit for future purchases, or a prompt refund. Efficient reverse logistics not only helps manage costs by minimizing unnecessary shipping and labor expenses, but also plays a direct role in customer satisfaction and loyalty. When returns are handled quickly and fairly, customers are more likely to become repeat customers and leave positive online reviews, boosting the reputation of the ecommerce store.
Moreover, effective reverse logistics allows ecommerce businesses to recover value from returned merchandise, whether by restocking items for future inventory or offering them at a discount. This capability is especially important during peak periods like the holiday shopping season, when return volume surges and customer expectations are at their highest. By investing in robust ecommerce returns management and leveraging technology such as returns software and online portals, online merchants can save time, reduce hidden fees, and ensure that the returns management process supports both operational efficiency and customer retention.
In today’s competitive online shopping landscape, reverse logistics is no longer just an operational necessity—it’s a strategic differentiator that helps online retailers manage returns, control costs, and deliver the level of service that customers expect.
Major Retailers’ Return Policy and Fee Policies
Today’s return fee policies are often spelled out on retailer websites. Having a clear and accessible ecommerce return policy is crucial, as half of online shoppers review a retailer’s returns policy before buying. Recent policy language confirms the new charges:
- Macy’s: Store returns remain free, and members of its Star Rewards program get free return shipping. All other customers have a $9.99 return shipping fee (tax added) deducted from their refund. In short, only loyalty members or in-store returns are truly free – mail-in returns for other shoppers incur the fee. Macy’s ecommerce return policy also clearly defines the return window for eligible items.
- JCPenney: Its online return portal clearly states a flat $8 UPS fee for any mail-in return, streamlining the process by allowing customers to generate return labels and manage returns easily. (In-store returns remain free.) The return window and any applicable restocking fees are outlined in their ecommerce return policy, helping set clear expectations for customers.
- J.Crew: The official returns FAQ notes that using the prepaid return label costs $7.50 for any number of items, which is deducted from the refund. Exchanges, however, are offered at no charge. Their policy details the return window and any restocking fees for certain items.
- T.J. Maxx/Marshalls: Both retailers’ sites say that any return by mail incurs an $11.99 shipping-and-handling fee (per package). Again, in-store returns for online orders remain free of charge. Their ecommerce return policies specify the return window and clarify when restocking fees may apply.
In each case, the flat fee mirrors the amounts reported in the press. For example, ABC News notes “Marshall’s and T.J. Maxx charge $11.99 per package… Macy’s charges $10” (the $9.99 is often rounded to $10 in coverage). These updated policy details illustrate how return fees have moved from rumor to reality. (Retailers emphasize that avoiding the fee is possible by returning in-store, but that still means accepting returns as a cost of operations. Clear policies on when and how merchants accept returns, including any restocking fees, are essential for compliance and customer trust.)
Industry Outlook: Retail and logistics surveys indicate this trend will continue. In a recent NRF report summary, 64% of merchants said updating their returns process is a priority. Retailers are striking a new balance: maintaining customer goodwill while protecting their margins. For mid-market brands, the lesson is clear: treat returns as a cost center, not a free bonus. Expect return fees, tighter deadlines or other policies such as clearly defined return windows and restocking fees to roll out as standard practice, and plan your operations accordingly. Having a return policy that is easy to find and understand can reduce customer frustration and increase sales. Clear return policies that are easy to find and understand improve customer experiences, build trust, and encourage repeat business.
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Learn About Sustainable ReturnsFrequently Asked Questions
Why are returns costly for retailers?
Returns touch almost every part of the retail operation. Every return generates a host of expenses before a refund is even issued. Key cost components of handling a return include:
- Return shipping: Even if retailers use a prepaid label, they ultimately pay the carrier. This often runs on the order of $7–$15 per package, depending on weight and distance.
- Processing labor: Warehouse teams must unpack, verify, and inspect returned items. Typical labor costs add roughly $5–$9 per return (about 12–18 minutes of work).
- Restocking and materials: If original packaging is damaged, retailers spend on replacement materials, labels, and packing (often $1–$3 extra). Even time spent relabeling or condition-checking adds to cost.
- Inventory impact: While an item is being returned (often 7–14 days in transit and processing), it sits off the market and cannot generate new sales. This delay can mean lost revenue—imagine a dress returned at Christmas, which might have sold again if it were immediately available. One analysis quantified this “down time” cost as tens of thousands of dollars in foregone margin for a mid-size retailer.
- Markdowns and write-offs: Not all returns can be resold at full price. Studies show 15–25% of returned goods require discounting or disposal. At a 40% markdown, a $45-margin item loses $18 margin; at worst it loses the full $45 if unsaleable. Over a year, markdowns can add hundreds of thousands in hidden losses for a mid-sized retailer.
- Refund fees: The financial transaction itself has a cost. Returns incur payment processing fees (around $2–$3) since the retailer is refunding money and still paying credit-card networks.
- Customer service: Each return can spawn multiple service interactions. Industry benchmarks suggest 2–3 inquiries per return (authorization, status check, refund query), with up to 10–12 minutes of support time each. This represents a non-trivial operational expense.
When tallied together, these costs convert returns from a small blip into a significant drag on profits. Bizowie’s breakdown demonstrates how the “gross margin” on a sale can evaporate once reverse logistics are factored in. Retailers might earn a 45% margin on a fashion item, only to see it cut by 55–65% after return handling, markdowns, and fees. In balance-sheet terms, returns directly shrink net revenue and increase selling expenses.
What sources were leveraged for return policy and cost data?
The information above is drawn from official retailer sites and industry reports. For example, Macy’s, JCPenney and J.Crew customer-service pages explicitly show their return shipping fees. T.J. Maxx and Marshalls policy pages list the $11.99 return fee. News coverage and industry surveys provide context and stats: Good Morning America (via ABC15) reports retailer fees for Macy’s, JCPenney, J.Crew and others; and CBS News cite NRF/Happy Returns data (72% of retailers charging fees, cost breakdowns); and a Supply & Demand Chain Executive summary of the 2025 NRF returns report provides detailed percentages on return costs and policies.
- https://www.abc15.com/news/smart-shopper/what-to-know-about-new-return-fees-timelines-from-retailers-for-holiday-gifts#:~:text=This%20holiday%20gift,fee%2C%20which%20is%20money%20custom
- https://www.cbsnews.com/philadelphia/news/holiday-shopping-extended-return-policy/#:~:text=Return%20and%20restocking%20fees
- https://www./news/saving-smarter/holiday-shoppers-face-growing-return-fees-as-retailers-cut-back-on-free-policies#:~:text=A%20new%20National%20Retail%20Federation,items%20back%20in%20many%20cases
- https://online-shopping-free-return-policies/#:~:text=According%20to%20a%20report%20released,last%20year
- https://www.modernretail.co/operations/the-case-for-and-against-return-fees/#:~:text=One%20of%20the%20biggest%20reasons,19%20pandemic
- https://erp-for-high-return-ecommerce-managing-reverse-logistics-without-margin-erosion#:~:text=The%20economics%20are%20sobering,attributable%20to%20reverse%20logistics%20costs
Written By:
Manish Chowdhary
Manish Chowdhary is the founder and CEO of Cahoot, the most comprehensive post-purchase suite for ecommerce brands. A serial entrepreneur and industry thought leader, Manish has decades of experience building technologies that simplify ecommerce logistics—from order fulfillment to returns. His insights help brands stay ahead of market shifts and operational challenges.
Turn Returns Into New Revenue
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TikTok’s USPS Label Requirement Is Not a Carrier Change. It’s a Control Shift
In this article
26 minutes
- TikTok USPS Shipping: New Label Rule (Effective Jan 1, 2026)
- Introduction to TikTok Shipping
- TikTok Shop Overview
- Why Is TikTok Forcing In-Platform USPS Labels?
- How Different Players Are Affected: An Ecosystem Vibe Check
- Shipping Label Options Under the New Rule
- Order Management and Compliance Under TikTok’s New Label Rule
- The Bigger Picture: Marketplace Control and the Future of Shipping Software
- Implications for Ecommerce Operators
- Managing Shipping Services Under TikTok’s New Constraints
- Preparing for the Change Before January 1, 2026
- Conclusion: This Is Not a USPS Change. It Is a Marketplace Control Shift.
- Frequently Asked Questions
TikTok Shop is ending an era of seller-controlled shipping, at least for USPS. Starting January 1, 2026, any order shipped via the U.S. Postal Service on TikTok’s marketplace must use a postage label purchased through TikTok Shipping. If a seller attempts to use a USPS label generated outside TikTok, for example through Shopify, ShipStation, a 3PL’s postage account, or a direct USPS account, TikTok can reject that shipment as non-compliant. This is not a USPS policy change. It is a TikTok enforcement change that moves a core part of fulfillment from a seller-owned workflow into platform-owned infrastructure.
That distinction matters because the operational blast radius is larger than “broken integrations.” Shipping labels sit at the intersection of cost control, SLA compliance, fraud prevention, and data visibility. By forcing USPS label purchase inside TikTok Shipping, TikTok is not just altering a carrier preference. It is asserting control over how sellers execute fulfillment on-platform and making external tooling, negotiated rates, and flexible routing conditional. This article breaks down what is changing on January 1, why TikTok is implementing it, how the ecosystem is reacting, and what it signals about the future of shipping software inside closed commerce ecosystems.
TikTok USPS Shipping: New Label Rule (Effective Jan 1, 2026)
TikTok Shop communicated to sellers that USPS shipping labels must be purchased and printed through TikTok Shipping starting January 2026, with sellers expected to be ready by December 31, 2025 to avoid fulfillment disruptions. Starting January 2026, all USPS shipping labels must be purchased and printed through TikTok Shipping, and sellers must complete all necessary adjustments by December 31, 2025, to avoid disruption in order fulfillment. In practical terms, if USPS is selected as the carrier under a seller-shipping workflow and the label is not generated through TikTok’s system, the shipment can fail or be rejected at the platform layer.
It is important to keep causality straight. This is not USPS changing label requirements for ecommerce sellers. TikTok’s policy is the gating mechanism. Retail coverage notes that TikTok did not provide a detailed reason for the change and that USPS declined to comment when asked. That silence is part of why operators should treat this as a platform control move rather than a carrier-driven shift.
To understand why this breaks so many existing workflows, look at how most multichannel stacks are built. TikTok order data flows into an OMS, Shopify, or shipping platform. Labels are generated in a single console for all channels, often using negotiated rates tied to aggregate volume. That consolidated model reduces cost and error. TikTok’s new rule unbundles it for USPS specifically by forcing label generation back into TikTok Shipping for that carrier lane, even if every other channel still runs through a unified shipping tool. Stores will need to adjust their order fulfillment processes to ensure they ship orders using USPS labels purchased through TikTok Shipping, in compliance with the new requirements. If sellers use third-party services like Shopify or ShipStation, they should confirm whether those services support TikTok Shipping to ensure seamless order fulfillment. Sellers must now ship orders using USPS labels purchased directly through TikTok Shipping, which impacts how stores manage their shipping workflows.
Sellers can reach out to their account manager or seller support for assistance with setup and troubleshooting during the transition from in-house warehouse to a 3PL or onboarding process transition.
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See AI in ActionIntroduction to TikTok Shipping
TikTok Shipping is TikTok Shop’s dedicated logistics solution, designed to simplify and optimize the shipping process for sellers on the platform. By leveraging TikTok Shipping, sellers can purchase and print USPS labels directly from the TikTok Shop Seller Center, ensuring full compliance with the latest USPS label requirements. This integrated shipping service streamlines fulfillment, helping sellers cut shipping costs and reduce manual errors while improving delivery speed and reliability.
For TikTok Shop sellers, TikTok Shipping offers exclusive discounted shipping rates, making it an affordable option for businesses of all sizes. The platform’s logistics tools are built to support seamless order fulfillment, from label creation to package tracking, all within the Seller Center. Sellers can easily access step-by-step instructions and support resources in the TikTok Shop Seller Center to get started with TikTok Shipping and ensure their shipping process is both efficient and compliant.
By centralizing label creation and shipping management, TikTok Shipping empowers sellers to focus on growing their shop while maintaining high standards of fulfillment and customer satisfaction. For more information on setting up TikTok Shipping, please refer to the TikTok Shop Seller Center.
TikTok Shop Overview
TikTok Shop is a global ecommerce marketplace that enables sellers to list, promote, and sell products directly to customers through the TikTok platform. With the upcoming changes effective January 2026, TikTok Shop now requires all USPS shipping labels for shop orders to be purchased and printed exclusively through TikTok Shipping. This ensures that every shipment is properly verified and meets carrier compliance standards.
Sellers can manage their entire shipping process within the TikTok Shop Seller Center, where they can generate USPS shipping labels, track shipments, and monitor order status. TikTok Shop offers a range of shipping options—including USPS, FedEx, and UPS—allowing sellers to select the most cost-effective and reliable carrier for each order. By integrating with TikTok Shop’s fulfillment logistics tools, sellers can streamline their shipping operations, reduce shipping costs, and deliver a better experience to their customers.
The platform’s robust logistics and shipping features are designed to help sellers scale their business, maintain compliance, and keep fulfillment running smoothly. Whether you’re shipping with USPS, FedEx, or UPS, TikTok Shop provides the tools and support needed to manage shipping labels, track packages, and ensure timely delivery—all from a single, centralized platform.
Why Is TikTok Forcing In-Platform USPS Labels?
On the surface, the rule looks like a technical integration change. Operationally, it is a structural shift in who “owns” shipping. Marketplaces increasingly treat shipping as platform infrastructure because shipping is where marketplaces can enforce service levels, reduce fraud, standardize tracking, and capture operational data. TikTok’s new requirement is consistent with that trajectory. Retail coverage frames it as TikTok tightening shipping options and increasing control over the shipping process for orders made on-platform.
For any business aiming to succeed and scale on TikTok Shop, understanding and utilizing TikTok Shop’s shipping solutions is essential. Leveraging these services can help businesses improve logistics efficiency and reduce costs, making them crucial for growth on the platform.
There are several plausible motivations supported by how marketplaces operate and by signals in community discussions and TikTok’s own documentation. None require assuming USPS forced anything. Instead, they align with platform incentives.
1) Control and compliance at the label layer
Labels are where compliance becomes enforceable. If TikTok controls label purchase, it can enforce that shipping method, service level, postage payment, and tracking format meet its requirements. This reduces ambiguity around whether postage was paid correctly and whether tracking numbers are valid for the carrier selected. Community discussions around the change repeatedly point to “verification failures” and workflow breaks when USPS labels originate outside TikTok. The key point is that TikTok is not merely reading tracking data. It is validating how that tracking was created.
2) Data ownership and performance measurement
When labels are generated externally, the marketplace receives tracking after the fact. When labels are generated internally, the marketplace captures more complete metadata at creation time, including service selection, expected transit profile, origin location, and timing. That data enables tighter measurement of seller performance and can support automated enforcement for late shipments, scanning delays, and delivery exceptions. TikTok’s shipping documentation emphasizes standardized shipping options and built-in label creation across carriers, which is consistent with a desire to instrument shipping performance inside the platform.
3) SLA enforcement and buyer experience
TikTok is still scaling its marketplace trust layer. Standardized tracking and consistent label origination help reduce cases where orders show “shipped” but never progress, or where tracking numbers do not match the carrier used. Providing consistent tracking updates helps build trust and satisfaction among buyers, as they can reliably monitor their orders. When TikTok controls USPS shipping labels, it enables better service to buyers through more reliable delivery and timely tracking updates. Operators often treat these as edge cases, but at marketplace scale they become reputational risk. Centralizing label creation is a way to reduce variability and make SLA enforcement more consistent, even if the operational burden shifts onto sellers and fulfillment partners.
4) Platform economics and leverage over shipping cost
This is where many sellers jump too quickly into conclusions. It is possible for marketplaces to capture economic value in the shipping layer through negotiated rates, program fees, or behavioral steering. But the more defensible operator interpretation is simpler: the platform gains leverage. Once label purchase is inside the platform, the platform can change allowed services, eligibility, and enforcement rules without waiting for third-party tooling to catch up. That leverage is the strategic asset. By controlling label purchase, the platform can also influence shipping costs, and sellers may benefit from TikTok’s negotiated USPS rates, which can be more competitive than standard retail postage prices. The postage margin, if any exists, is secondary to control.
How Different Players Are Affected: An Ecosystem Vibe Check
To understand why this change matters, it helps to run a quick “vibe check” across the ecosystem. Not in the social sense, but in the operational sense: who gains control, who loses flexibility, and who has to rebuild workflows. The impact of the policy change varies across other regions, affecting both international imports and domestic distribution, which can influence fulfillment processes and compliance requirements.
For more details on regional impacts and compliance, refer to the official TikTok Shop Seller Center documentation.
TikTok Shop
TikTok is positioning itself as a logistics orchestrator rather than a passive order source. Retail coverage notes that TikTok did not give a detailed explanation, but the action itself is explanatory: TikTok is tightening the set of permissible workflows. This is how marketplaces mature. They start as permissive demand engines, then become rule engines once volume and risk justify standardization.
There is also a timing signal. TikTok communicated readiness expectations by the end of 2025, which indicates TikTok anticipates disruption and is willing to accept short-term friction to gain long-term control. That willingness is a tell. Platforms do not impose workflow-breaking requirements unless they believe the ecosystem will adapt because the demand is valuable enough.
USPS
USPS is not the actor driving this policy. USPS still delivers packages and still provides labels through its normal channels. But USPS becomes “gated” behind TikTok’s shipping interface for TikTok Shop orders. Retail reporting highlights that USPS declined to comment when asked, which reinforces the view that this is a marketplace enforcement decision, not a Postal Service mandate.
The operational consequence is that USPS becomes less directly accessible as a cost lever for TikTok sellers. Sellers who relied on their own commercial pricing, third-party postage accounts, or pooled 3PL rates now have to compare those against whatever TikTok Shipping offers and decide whether to keep USPS on TikTok at all. USPS is often considered the most affordable option for small and light products, and many TikTok Shop sellers find it to be the only affordable shipping option for these items.
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See the 21x DifferenceShipping software providers and integrations
This is where the “broken integrations” story is real, but incomplete. The deeper issue is that shipping software becomes a conditional participant. In the ShipStation community thread discussing TikTok’s notice, sellers focus on what happens when USPS is selected under seller shipping and labels are not TikTok-generated, and the thread references TikTok directing partners to an “ERP docking solution” contact for integration pathways. New restrictions on USPS label generation directly impact seller shipping orders, especially for those using third-party platforms. That framing matters: the platform is positioning external software as an allowed integration, not the system of record.
For operators, the risk is not only that a feature breaks. The risk is that shipping software loses its role as the unified label layer across channels. If each marketplace starts asserting ownership over labels for a subset of carriers, the “single pane of glass” model fragments. Teams either accept fragmentation or rebuild orchestration logic that can handle marketplace-owned label flows without losing internal cost visibility.
For detailed integration steps and support, please refer to the TikTok Shop Seller Center or official integration guides.
3PLs and fulfillment operators
3PLs feel this immediately because they operate at the workflow layer. A 3PL typically prints labels in its own WMS or shipping system, often consolidated across many clients. TikTok’s policy can force a carve-out where TikTok-USPS labels must originate inside TikTok Shipping, which introduces operational complexity: another label source, another failure mode, another reconciliation path. However, sellers can still work with non-USPS carriers outside of the TikTok Shipping system after the new policy takes effect, allowing for more flexible order fulfillment options.
Retail coverage includes an example of a 3PL opting not to use TikTok Shop labels because it adds complexity and pressures margins, and instead considering shifting TikTok orders to other carriers while acknowledging the cost tradeoff for lightweight items where USPS is often the cheapest option. This is a pragmatic response: operators will route around constraints or explore 3PL options if the constraint increases error rate or labor cost, even if postage is higher.
US-based sellers
US sellers have the most options, but also the most decisions to make. If your TikTok catalog skews small and light, USPS is often the margin-preserving carrier. If TikTok Shipping USPS rates are competitive and the label workflow is stable, many sellers will keep USPS and adapt. If rates are worse or workflows create failure risk, sellers may shift to UPS or FedEx for TikTok orders and accept higher cost as the price of operational consistency.
The most common operational mistake is treating this as a one-time switch. In reality, sellers will likely end up with a hybrid model: USPS via TikTok Shipping when economics justify it, and other carriers through existing systems when control and automation matter more. If sellers wish to continue to work directly with logistics service providers, they will need to choose carriers other than USPS. That hybrid increases complexity, which is exactly why this policy is a control shift. It forces sellers to reorganize around TikTok’s preferred infrastructure.
International sellers
International sellers face a sharper edge. A key reason many cross-border sellers compete in the US is the ability to use postal networks and cost-effective handoffs. For sellers importing goods from China, reliable logistics partners are essential to manage cross-border shipping and comply with TikTok Shop’s shipping label regulations. The Courier Mail coverage (Australia) signals that the rule could price some Australian sellers out of the US market by restricting the use of standard international post pathways, effectively forcing more expensive shipping alternatives for reaching US customers. The exact operational impact will vary by seller setup, but the direction is clear: when a marketplace gates access to a low-cost carrier option, cross-border economics change fast.
This also highlights why it is inaccurate to frame the change as “TikTok switching carriers.” TikTok is not replacing USPS. TikTok is changing the governance model for how USPS can be used on TikTok orders. That governance model disproportionately impacts sellers whose competitive advantage depends on flexible, low-cost postal access.
Additionally, TikTok Shop operates as a ‘fourth-party logistics provider’ (4PL), purchasing postage directly from USPS and selling the labels to creators.
Shipping Label Options Under the New Rule
With the new requirement taking effect January 1, 2026, TikTok Shop sellers must adapt their shipping process to ensure all USPS shipping labels for TikTok Shop orders are purchased and printed directly through TikTok Shipping. This change means that traditional methods—such as generating USPS labels via third-party shipping software, direct USPS accounts, or external fulfillment platforms—are no longer accepted for TikTok Shop shipments using USPS. Instead, TikTok Shipping becomes the single source of truth for USPS label creation on the platform.
For sellers, this narrows the shipping label options for TikTok Shop orders to two main paths:
- USPS Labels via TikTok Shipping: If you choose USPS as your carrier for TikTok Shop orders, you must generate and print your shipping labels using TikTok Shipping. This is managed through the TikTok Shop Seller Center, where you can access TikTok Shipping labels, track shipments, and ensure your fulfillment process aligns with the platform’s new requirement. This integration is essential for compliance—any USPS label not created through TikTok Shipping risks shipment rejection or fulfillment disruption.
- Other Carriers via Existing Systems: For non-USPS carriers (such as UPS or FedEx), sellers can continue to use their preferred shipping software or fulfillment solutions to generate shipping labels, as long as those carriers remain label-flexible within TikTok Shop’s seller shipping workflow. However, USPS is now gated behind TikTok’s system, so this flexibility does not apply to USPS shipments.
To stay compliant and avoid fulfillment issues, sellers should review their current shipping process and ensure that TikTok Shipping is fully integrated for USPS label creation. This may involve updating order management workflows, training fulfillment teams on the new label generation steps, and confirming that all TikTok Shop orders using USPS are processed through the TikTok Shop Seller Center. By proactively adapting to this new requirement, sellers can maintain smooth fulfillment, accurate tracking, and a positive customer experience on TikTok Shop.
Ultimately, the new rule centralizes USPS label creation within TikTok’s ecosystem, making it critical for sellers to align their shipping operations with TikTok Shipping. This shift not only ensures compliance but also supports a more streamlined and platform-approved fulfillment process for all TikTok Shop orders shipped via USPS.
Order Management and Compliance Under TikTok’s New Label Rule
With TikTok’s new USPS label rule taking effect, order management and compliance are more important than ever for TikTok Shop sellers. To remain compliant, sellers must use TikTok Shipping for all USPS shipments—meaning USPS labels must be purchased and printed directly through the TikTok Shop Seller Center. Using external shipping tools or platforms for USPS labels is no longer permitted for TikTok Shop orders, and non-compliance can result in delivery issues, tracking problems, or even order cancellations.
To avoid these risks, sellers should review the TikTok Shop Seller Center for detailed guidance on setting up and using TikTok Shipping. The Seller Center provides resources for managing shop orders, generating shipping labels, and tracking shipments, making it easier to stay organized and compliant. If you encounter any challenges during the transition, Seller Support and your Account Manager are available to assist with troubleshooting and best practices.
By following the new label rule and managing all USPS shipments through TikTok Shipping, sellers can ensure their orders are verified, compliant, and delivered efficiently. This not only reduces costs and fulfillment headaches but also helps maintain high customer satisfaction and account health. For ongoing support and updates, please refer to the TikTok Shop Seller Center and stay connected with your Seller Support team.
The Bigger Picture: Marketplace Control and the Future of Shipping Software
Zoom out and this looks less like a TikTok-specific update and more like a marketplace maturity pattern. Marketplaces want to own the fulfillment experience because fulfillment is where customer trust is won or lost. Owning labels is a direct way to own fulfillment because labels are the starting point for tracking truth, on-time metrics, claims, and dispute resolution.
TikTok’s own Seller University documentation positions TikTok Shipping as a built-in system offering label creation across carriers. TikTok’s shipping service provides integrated shipping label creation and several shipping options from FedEx, UPS, and USPS, making it essential for sellers to use the approved shipping service for compliance, cost savings, and reliable logistics. When a marketplace documents shipping as a platform-native workflow rather than a seller-owned workflow, it is signaling how it intends the ecosystem to operate. The USPS requirement is an enforcement step that makes that intention real.
The contrarian insight is that this is not primarily a “carrier” story. It is a software boundary story. Shipping software historically sat outside marketplaces as the orchestration layer. This change moves the boundary inward. If other marketplaces follow, external shipping tools will still matter, but more as routing and reporting systems that integrate into platform-owned label endpoints, rather than as the origin point for every label across every channel.
That shift has second-order consequences: pricing visibility gets harder, reconciliation becomes multi-source, and operational teams have to manage exceptions across platforms rather than inside a single tool. In other words, platform control increases, and operator workload can increase with it unless internal processes adapt.
Implications for Ecommerce Operators
If you run fulfillment, this policy forces a set of tactical decisions and a strategic reframe. The tactical decisions are about compliance by January 1. The strategic reframe is about how much of your shipping stack is truly “yours” when marketplaces can change label governance with a policy update.
1) Audit your TikTok shipping decision tree, not just your carrier mix
Many teams will ask, “Should we keep using USPS?” The better question is, “What routing logic do we want for TikTok orders given that USPS labels must originate in TikTok Shipping?” For some catalogs, keeping USPS makes sense. For others, forcing a separate label source creates error risk that outweighs postage savings. You need to model both cost and workflow reliability.
2) Stress test failure modes before peak volume hits
The hidden cost of marketplace-owned shipping flows is exception handling. What happens if TikTok Shipping label creation is down? What happens if a label is voided and needs to be reissued? What happens if your WMS expects label creation inside your existing system for scan-to-pack? These are not edge cases for a warehouse. They are daily realities. Delivery issues can arise from tracking discrepancies, non-compliance, or improper label attachment, especially under new shipping policies. Proper label attachment is critical; labels must be flat on the largest surface of the package to avoid scanning failures. Seller community threads show sellers already anticipating workflow breaks tied to USPS selection under seller shipping. Use that as a warning signal to test early and document workarounds.
3) Align with your 3PL on who owns the label step
If you use a 3PL, this change can force contract-level and process-level alignment. Some 3PLs may refuse to operate inside TikTok Shipping because it adds tooling overhead and complicates margin. Others may accept it but charge for the additional complexity. Either way, you need a clear operating model: does the 3PL generate TikTok Shipping labels on your behalf, or do you route TikTok orders to carriers that remain label-flexible?
4) Prepare finance for multi-source postage and reconciliation
When label purchase is split across systems, invoice and cost attribution can drift. TikTok Shipping labels may be billed differently than your normal postage accounts. If you are used to pulling all postage spend into a single reporting view, that view will fragment. Build a reconciliation plan now so that the first month of 2026 does not become a “we cannot explain shipping margin” month.
Managing Shipping Services Under TikTok’s New Constraints
This is not a recommendation to use any particular tool. It is an operational reality: if you sell on TikTok Shop and want to use USPS for those orders, you have to treat TikTok Shipping as the source of truth for that USPS label flow. TikTok’s Seller University shipping overview frames TikTok Shipping as a built-in pathway for label creation and carrier options, which signals how TikTok expects sellers to operate. Upgraded TikTok Shipping is also available as an advanced logistics solution, offering integrated carrier management, automated shipping label issuance, and streamlined operations for sellers.
That means operators should formalize a policy for TikTok orders, similar to how they formalize policies for other channels: which SKUs qualify for USPS, which qualify for alternative carriers, and which require stricter delivery control. The difference is that the governing platform now owns one of the core levers, label origination, for a major carrier option. For non-urgent deliveries of lightweight items, USPS Ground Advantage is the primary budget-friendly option.
For many teams, the cleanest operational approach will be to segment TikTok fulfillment into one of two lanes:
- Lane A: USPS shipments where TikTok Shipping label creation is used intentionally and integrated into pack workflows.
- Lane B: Non-USPS shipments where existing shipping systems remain the label origin point, preserving negotiated rates and automation.
The goal is to make the complexity explicit rather than letting it leak into daily operations as ad hoc exceptions.
Preparing for the Change Before January 1, 2026
Preparation is less about flipping a switch and more about making sure your operation does not get trapped between systems on day one. Retail coverage notes TikTok told sellers to be ready by December 31 to avoid disruptions. Treat that as a minimum bar.
To ensure a smooth transition, follow the following steps:
- Review your current shipping process and identify any dependencies on previous carriers.
- Update your shipping software or platform settings to integrate TikTok USPS shipping.
- Verify package weight and dimensions accurately to avoid disputes and fees with USPS.
- Train your staff on new label printing and package drop-off procedures.
- Monitor your first shipments closely for any issues or delays.
A practical readiness checklist operators actually use
- Run a controlled test batch: generate TikTok Shipping USPS labels for a small set of real orders and validate scan-to-pack, tracking sync, and customer notifications.
- Document your exception paths: voids, reprints, address corrections, label creation downtime, and carrier swaps.
- Train fulfillment staff: the people printing labels need a stable workflow and clear escalation paths.
- Confirm 3PL capabilities: verify whether your partner will operate inside TikTok Shipping for USPS or requires you to route away from USPS for TikTok orders.
- Update your cost model: compare TikTok Shipping USPS pricing versus your existing USPS rate structure, especially for lightweight SKUs where USPS is the primary margin lever.
Notice what is not on this list: “wait and see.” Marketplace enforcement dates tend to arrive exactly when promised. The operational risk of waiting is not theoretical. It shows up as canceled orders, late shipment defects, and customer support volume when labels fail validation.
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Cut Costs TodayConclusion: This Is Not a USPS Change. It Is a Marketplace Control Shift.
TikTok’s USPS label requirement is best understood as a governance shift in how marketplaces assert control over fulfillment. TikTok is moving USPS label origination into TikTok Shipping, which makes external shipping tools and negotiated postal workflows conditional rather than default. Retail reporting frames the move as TikTok tightening shipping options and increasing control over shipping processes. Seller and software communities are already signaling operational concern about workflow failures when USPS is selected under seller shipping. TikTok’s own shipping documentation positions platform-native label creation as the intended operating model.
The actionable takeaway for operators is not “pick a new carrier.” It is “assume marketplaces will continue to pull logistics infrastructure inward.” If you want to avoid being surprised by the next control shift, build fulfillment processes that can tolerate platform-owned label flows while preserving internal cost visibility, reconciliation discipline, and exception management.
Frequently Asked Questions
What exactly is TikTok’s USPS shipping requirement starting January 1, 2026?
Starting January 1, 2026, TikTok Shop requires that USPS shipping labels for TikTok orders be purchased and printed through TikTok Shipping. USPS labels generated outside TikTok, such as through Shopify, ShipStation, a 3PL postage account, or a direct USPS account, can be rejected for TikTok Shop orders.
Is this a USPS policy change?
No. This is a TikTok Shop enforcement change. Retail coverage notes USPS declined to comment, and the policy is communicated as a TikTok platform requirement rather than a Postal Service rule update.
Why would TikTok force sellers to buy labels inside TikTok Shipping?
The most supported operational reasons are control and compliance, better data visibility at label creation, tighter SLA enforcement through standardized workflows, and reduced tracking and label fraud risk. The change also increases TikTok’s leverage over fulfillment rules because label origination becomes platform-owned infrastructure.
What breaks for sellers using Shopify or shipping software tools?
If your workflow relies on generating USPS labels in an external system, TikTok orders using USPS can fail validation because TikTok expects the USPS label to originate inside TikTok Shipping. Community threads in ShipStation and seller forums focus on this exact failure mode and the resulting integration pressure.
How does this affect 3PLs and fulfillment centers?
3PLs may need to add TikTok Shipping as a separate label source for USPS, which increases tooling complexity, exception handling, and reconciliation work. Some fulfillment operators may shift TikTok orders to other carriers to avoid the operational overhead, even if that raises postage cost for lightweight shipments where USPS is typically cheapest.
Why is this especially disruptive for international sellers?
International sellers often depend on low-cost postal pathways to compete in the US. Coverage of the policy change signals that restricting how USPS can be used on TikTok orders may force some international sellers into higher-cost shipping options, altering unit economics quickly.
Written By:
Rinaldi Juwono
Rinaldi Juwono leads content and SEO strategy at Cahoot, crafting data-driven insights that help ecommerce brands navigate logistics challenges. He works closely with the product, sales, and operations teams to translate Cahoot’s innovations into actionable strategies merchants can use to grow smarter and leaner.
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Why the Auctane-WWEX Merger Redefines the Future of Ecommerce Logistics
Introduction
The $12 billion merger of Auctane and WWEX Group is poised to reshape how ecommerce brands manage shipping and logistics. By combining a leading shipping software platform with a major third-party logistics provider, this deal signals that software alone is no longer sufficient to stay competitive in the evolving fulfillment landscape. The Auctane–WWEX merger isn’t about adding warehouse space or trucks for the sake of scale—it’s about software moving closer to physical operations. As shipping profit margins shrink and every provider offers similar basic tools, Auctane’s union with WWEX hints at a new strategy: integrate technology with logistics services to gain an edge. This article will explore who these companies are, why private equity is driving this convergence now, how the buzz around AI fits in, and what it all means for ecommerce brands choosing their shipping solutions.
Meet the Players: Auctane and WWEX
Before diving into the implications, it’s important to understand the two companies involved. Auctane (formerly Stamps.com) is a leading provider of ecommerce shipping software solutions. If you’ve printed USPS or UPS labels online for your business, there’s a good chance you’ve used an Auctane product. Auctane operates a family of well-known platforms including ShipStation, Stamps.com, ShippingEasy, ShipEngine, ShipWorks, Endicia, Metapack, and others. These tools help online sellers manage orders, compare carrier rates, print labels, and track shipments across multiple sales channels. In fact, Auctane’s software powers billions of shipments each year for businesses around the globe. Thoma Bravo, a private equity firm, took Auctane private in 2021 by acquiring Stamps.com for about $6.6 billion, reflecting the high value of these shipping software platforms during the ecommerce boom.
WWEX Group, on the other hand, is a logistics powerhouse built from the merger of Worldwide Express, GlobalTranz, and Unishippers. WWEX isn’t a warehouse operator in the traditional sense—it’s a third-party logistics (3PL) services platform that specializes in parcel and freight shipping solutions. Worldwide Express (together with its franchise network Unishippers) has long been one of the largest authorized UPS resellers for small and mid-size businesses, while GlobalTranz brought strength in freight brokerage (LTL and truckload) for larger shippers. Today, under the WWEX Group banner, the company serves over 121,000 customers with a broad suite of shipping options: small package delivery via UPS, LTL freight, full truckload brokerage, and more. WWEX Group is the second-largest privately held logistics company in the U.S., with an annual system-wide revenue nearing $5 billion. It’s also the largest non-retail UPS Authorized Reseller in the country, meaning it leverages huge volume to secure discounted shipping rates for clients. WWEX Group is headquartered in Tempe, Arizona. In short, WWEX is a major 3PL intermediary that uses technology (like its SpeedShip platform) and a network of carrier relationships to help businesses ship smarter. By late 2025, WWEX Group reported roughly $4.4 billion in revenue for 2024, highlighting its significant scale in logistics.
Bringing these two players together means uniting Auctane’s software capabilities with WWEX’s physical carrier network and operational know-how. Auctane excels in the “digital” side of shipping—order data, label generation, and automation—while WWEX excels in the “physical” side—getting packages picked up, consolidated, and delivered via carrier partners. Each on their own is a leader in its niche; together, they form a more vertically integrated shipping solution. The merger will result in the formation of a new company, with strategic investors including Ridgemont Equity Partners and Providence Equity Partners. As we’ll see, this marriage is being driven by forces that are reshaping the logistics industry.
Private Equity’s Push for Software–Logistics Convergence
It’s no coincidence that this merger is happening under the guidance of private equity investors. Thoma Bravo, which owns Auctane, is spearheading the plan to merge Auctane with WWEX Group into a single company valued around $12 billion, creating what competitors are calling a 12 billion shipping technology powerhouse. Talks to merge the two companies began as early as December, with ongoing discussions and a formal proposal being considered as of 12 2025. This matter is significant, as the transaction is worth billions and will result in the merging of software and logistics units. In doing so, Thoma Bravo isn’t just merging two companies—it’s merging two historically separate parts of the ecommerce supply chain (software and logistics) under one roof. The combined company will leverage Auctane’s cloud-based software and WWEX Group’s extensive agent network for enhanced supply chain visibility and analytics. The merger aims to create a vertically integrated supply chain entity linking e-commerce shipping with a large agent-based brokerage network. This kind of convergence has a clear financial logic. By combining Auctane’s high-margin software business with WWEX’s extensive logistics volume, the new entity can offer a one-stop solution and potentially unlock cost efficiencies that neither could achieve alone. Thoma Bravo has signaled its commitment by planning a $500 million new equity investment into the combined company and intends to raise a direct loan of $5 billion to finance the merger. Thoma Bravo’s plan includes refinancing Auctane and WWEX’s existing debt with this $5 billion direct loan, utilizing private credit as a flexible alternative to traditional bank loans. In other words, the private equity firm is literally betting half a billion dollars of its own capital (and leveraging private credit markets for more) on the idea that an integrated shipping-tech company will be more valuable than the sum of its parts. The deal is expected to be completed following the finalization of ongoing talks and approval of the proposal.
Why are investors pushing this now? Private equity firms like Thoma Bravo specialize in accelerating growth and creating value, often through strategic mergers. In this case, they see operational synergies in uniting a software provider with a logistics provider. The goal is to create a vertically integrated platform capable of optimizing end-to-end supply chain operations. Instead of Auctane just providing the software that prints a shipping label and then handing off to a third party, the merged company can potentially handle the entire shipping process from order through delivery. This could mean streamlined services for customers (e.g. automatic selection of the best carrier or service for each order, guaranteed capacity during peak seasons, integrated parcel and freight solutions) that a standalone software firm couldn’t easily offer. It also means the combined company can capture more of the economic value of each shipment—software fees and a slice of the shipping spend—rather than each business taking only one piece.
Private equity’s playbook here also reflects a broader trend of consolidation in a fragmented market. The shipping software space has many competing tools, and the third-party logistics space has many regional players; both arenas have been ripe for roll-ups. By merging Auctane and WWEX, investors aim to create a dominant one-stop shop. This isn’t a growth-at-all-cost tech merger of two unprofitable startups—it’s a calculated combination of mature businesses to squeeze out inefficiencies and boost margins. Notably, the financing structure (heavily using private credit from firms like Blackstone) indicates confidence that the merged entity will generate strong, stable cash flows to service debt. In a high interest rate environment, private credit has become a key enabler for such large PE-driven deals, offering more flexible terms than traditional banks. The willingness of lenders to back a $5B direct loan for this merger underscores an expectation that together, Auctane and WWEX will be financially stronger than they were separately. Private equity firms share resources and relationships to achieve these ambitious investment goals.
Post this strategic and financial rationale, we’ll examine the market realities driving this convergence. The timing of this merger is a response to mounting pressures on standalone shipping businesses.
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See AI in ActionWhy Now? Shrinking Margins and the End of the “Standalone” Moat
Several industry pressures have set the stage for why this merger is happening in late 2025. The merger talks and deal announcement occurred in December, highlighting the immediacy and strategic timing of the move. One major factor is margin pressure in shipping and fulfillment. Over the past few years, carriers like UPS, FedEx, and USPS have steadily raised rates and surcharges. Ecommerce merchants, in turn, are extremely sensitive to shipping costs and transit times. This squeeze means that intermediaries – whether shipping software providers or 3PL resellers – have less room to take a cut. Auctane’s platforms historically earned revenue through subscriptions and by facilitating discounted postage (for example, Stamps.com resells USPS postage at a small margin). As carriers tighten discount programs and more merchants demand lowest-cost shipping, the profit margins on simply providing labels or API access have been compressing. In short, printing postage has become a commodity service; everyone expects cheap labels and good rates. The differentiation that standalone shipping software once had (like a nicer user interface or easier integrations) has narrowed as well. Competing platforms now offer very similar features – rate shopping, order management, bulk label printing, returns processing, etc. It’s hard to stand out on software features alone in 2025, because even ecommerce platforms like Shopify and marketplaces like Amazon offer built-in shipping tools to sellers.
WWEX faces a similar commoditization challenge on the logistics side. As a UPS reseller and freight broker, WWEX’s value to customers is to negotiate better rates and provide service. But digitalization in freight and small parcel is bringing more transparency. Small businesses can get instant shipping quotes online from multiple sources. UPS itself launched digital access programs that give platforms like Shopify and WooCommerce negotiated rates, which can bypass traditional resellers. To stay relevant, a 3PL like WWEX needs more than just a salesforce – it needs unique tech and data offerings.
This is why combining software with logistics is a timely defensive move. By merging, Auctane and WWEX can create proprietary advantages that neither could alone. For instance, the combined entity could use WWEX’s massive shipping volume data to feed into Auctane’s software, giving merchants smarter recommendations (like flagging the cheapest or fastest option across carriers based on real-time network conditions). It could also leverage Auctane’s integration into shopping carts and marketplaces to funnel more shipping business directly into WWEX’s network. Essentially, they want to move up the value chain from just providing labels or rates to actually controlling the shipping flow. This deeper operational involvement is harder for a new startup or a single-feature tool to replicate, thus rebuilding a “moat” against competition.
Another reason this is happening now is the pervasive narrative around AI and automation in logistics. 2023–2025 has been an era where every logistics tech company is touting AI-driven optimization, predictive analytics, and end-to-end visibility. To be sure, there are real gains to be had here: automated decision-making can route packages more efficiently, and machine learning can help predict shipping delays or choose optimal warehouse locations. Thoma Bravo itself has pointed to the importance of tech – the firm noted that logistics is undergoing a “tech-led transformation” with an emphasis on automation, real-time tracking, and predictive analytics to reduce costs and improve efficiency. In pitching the Auctane-WWEX deal, there’s been talk of creating data-driven logistics solutions and leveraging AI to disrupt old-school shipping processes.
However, it’s important to separate the AI hype from the core drivers in this merger. The reality is that AI alone isn’t a silver bullet for what ails shipping software companies. Yes, the combined Auctane/WWEX entity will surely use AI for things like dynamic pricing, delivery route optimization, or customer analytics. But those features are increasingly expected in modern software – competitors can often implement similar algorithms or use third-party AI services. What truly sets the stage for this merger is not a fancy new AI model, but the old-fashioned economics of scale and integration. When shipping volumes are high and margins per package are slim, controlling more of the supply chain is the surest way to squeeze out cost savings. For example, by integrating operations, the merged company might reduce duplicate overhead (one IT system instead of two, one support team, etc.) and negotiate even better carrier contracts by combining volume.
AI is thus part of the story, but it’s more of an enhancer than the foundation. Think of AI as the icing on the cake: it can make the combined platform smarter and more attractive, but it’s not the cake itself. The real “cake” here is the merging of physical logistics capabilities with software, creating a platform that can actually execute on the insights that AI might provide. Without trucks, planes, and carrier contracts, even the best shipping algorithm is just advice on a screen. Competitors in shipping tech can copy each other’s software features and AI tools relatively quickly, but they can’t overnight replicate a nationwide logistics network or a base of 100,000+ shipping customers. This is why Thoma Bravo is betting on a strategy that goes beyond software. As one analysis noted, the success of this deal will hinge on integrating systems and realizing cost synergies in operations, not just on any single technology trick.
In summary, the timing of the Auctane-WWEX merger comes as: (a) shipping software is becoming commoditized and needs a new edge, (b) logistics providers are seeking tech integration to stay competitive, (c) economic pressures (inflation, high interest rates) reward those who can cut costs via scale, and (d) the industry is buzzing about AI, providing a convenient narrative to package the deal as forward-looking. The next question is what this all means in practice for ecommerce businesses that rely on these kinds of services.
What the Auctane–WWEX Merger Means for Ecommerce Brands
If you’re an operations or logistics leader at an ecommerce brand, you might be wondering how this big merger in the shipping world will trickle down to you. On the surface, it might not cause any immediate changes—after all, it’s a merger of two vendors behind the scenes. But over time, a combined Auctane-WWEX could impact the options and value you get when choosing shipping software or services.
For one, expect more “all-in-one” shipping solutions to be offered. Traditionally, an online seller might use Auctane’s ShipStation (software) to manage orders and print labels, and separately use a 3PL or carriers for fulfillment and transport. Going forward, those lines will blur. The merged company will likely pitch ecommerce brands a unified package: use our platform to manage orders and access discounted shipping rates and get logistics support like pick-ups or freight quotes. For some brands, this could be very convenient. You might get a single point of contact and a single bill for software + shipping. There could be cost incentives too. For example, the combined firm could afford to offer the software at a low cost (or even free) if you commit to shipping volume through their logistics network – effectively bundling the service. This model is already seen in other areas (e.g. Amazon’s Seller Central provides free tools but makes money on fulfillment fees). Ecommerce companies should evaluate these bundles carefully: you could save money and hassle with an integrated solution, but you’ll want to ensure the shipping rates and service quality remain competitive.
The new entity aims to provide a premier customer experience with digital platforms and local agent support. People with knowledge of the deal expect these improvements in customer experience to be a key outcome of the merger.
The merger also means there may be fewer independent software choices over time. If shipping software alone isn’t a sustainable business, we might see more consolidation or partnerships in this space. Smaller shipping app providers could get acquired by logistics companies or shut down if they can’t differentiate. For brands, this consolidation can be a double-edged sword. On one hand, the remaining platforms will be more robust and feature-rich (since they’re backed by larger organizations). On the other hand, reduced competition can sometimes lead to higher prices or less flexibility. Brands should keep an eye on whether the merged Auctane-WWEX entity changes its pricing structure or pushes users into long-term agreements. Competition from alternatives (like Shopify’s native shipping features, or other 3PLs with tech platforms) will act as a check, but if the whole industry moves towards a few big integrated players, negotiating power may shift away from small customers.
Importantly, ecommerce leaders will need to consider how neutral their shipping software is. One advantage of using a standalone tool was that it was carrier-agnostic – the software would show you rates from USPS, UPS, FedEx, etc., and you choose what’s best for you. With a 3PL-owned platform, there could be a tilt. For instance, WWEX has a strategic relationship with UPS. If you’re on their platform, will it favor UPS services in the interface or offer better incentives for using UPS over FedEx or USPS? It’s possible. The merged company will of course claim to remain objective and give customers choices, but naturally they’ll want to steer volume to their preferred partners (that’s how they maximize their margins). As a brand, you should stay savvy: continue to compare offers and performance across carriers periodically, even if you’re getting comfortable with one integrated solution. The good news is that WWEX’s business model is built on offering multi-carrier options (UPS for parcel, a whole roster of LTL carriers for freight), so a tool like ShipStation under WWEX would likely still support many carriers – but the depth of integration or discounts might differ.
Another implication is the potential for improved support and innovation. A larger combined company can invest more in R&D. Ecommerce brands might see faster feature development in the shipping platforms – for example, more advanced analytics (combining operational data with your order data) to give insights like “ship-from locations that could save you time and cost” or proactive alerts about supply chain disruptions. The merger press releases talk about “data-driven logistics solutions” – if that materializes, merchants could benefit from smarter recommendations (like automatically splitting an order to ship from two warehouses because it’s cheaper, or suggesting switching carriers due to a service delay). Also, WWEX’s army of shipping consultants and agents could be at your disposal alongside the software. Some growing brands may appreciate having a human logistics expert who can help optimize their shipping strategy – something that pure software companies typically don’t provide. On the flip side, very small sellers who just want a self-serve app might feel a big organization is less personal or flexible than a niche software vendor was.
Finally, consider the resilience and roadmap of your shipping solution. The fact that Auctane felt the need to merge might indicate that the standalone software model has limitations in the long run. If you’re using an independent platform today (not Auctane’s), ask whether that provider has a path to stay competitive – will they partner with carriers or 3PLs, or could they be left behind? This doesn’t mean you should abandon ship immediately, but it’s wise to ensure any critical software you use is financially healthy or has strong backing. The last thing you want is your shipping software provider going under or being acquired suddenly without a plan, potentially disrupting your operations. In the coming years, we may see a tighter ecosystem where shipping tech and logistics services are intertwined. Brands should be prepared for that and focus on partners that offer real operational leverage, not just fancy tech demos. The Auctane-WWEX merger is a bellwether: it tells us that to truly reduce shipping costs and improve reliability, providers are willing to fundamentally change their business models and unite forces.
In conclusion, the Auctane–WWEX deal marks a shift in ecommerce logistics from siloed software or services toward integrated platforms. It highlights that as an ecommerce business, you should look for solutions that not only have sleek software features but also the physical network and leverage to back those features up. While we watch how effectively Auctane and WWEX execute this integration (and it’s by no means guaranteed success—combining two big companies is always tricky), the rationale behind it is clear. Shipping software on its own isn’t a moat anymore, and logistics services without top-tier software leave value on the table. The future belongs to those who can blend the two seamlessly.
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See the 21x DifferenceFAQ
Who is Auctane and what do they do?
Auctane is the parent company of several popular ecommerce shipping software brands, including ShipStation, Stamps.com, ShipEngine, ShippingEasy, Cahoot, and others. Formerly known as Stamps.com, Auctane’s platforms help online businesses compare carrier rates, print shipping labels, and manage order fulfillment across marketplaces and websites. In 2021, private equity firm Thoma Bravo acquired Stamps.com (Auctane) for about $6.6 billion, underlining Auctane’s status as a leader in shipping software.
Who is WWEX Group?
WWEX Group (Worldwide Express group) is a large third-party logistics provider that encompasses Worldwide Express, GlobalTranz, and Unishippers. It specializes in small-parcel shipping (especially through UPS) and freight services (LTL and full truckload) for over 121,000 customers ranging from small businesses to enterprises. WWEX Group is the second-largest privately held logistics company in the U.S., with annual revenue around $4–5 billion. Essentially, WWEX acts as an intermediary that gives businesses access to discounted shipping rates, logistics expertise, and a technology platform (SpeedShip) to manage shipments.
Why are Auctane and WWEX merging?
The merger is driven by a need to combine strengths as the market changes. Auctane brings best-in-class shipping software, while WWEX brings physical logistics networks and carrier relationships. Standalone shipping software tools are facing margin pressures and competition – many offer similar features and carriers have tightened discounts – so software companies like Auctane seek deeper integration with operations to stay competitive. Meanwhile, logistics providers like WWEX see value in offering a superior tech platform to their clients. By merging, they aim to create a one-stop shipping solution that can handle everything from order management to delivery. Private equity backer Thoma Bravo is facilitating the $12 billion deal, investing new equity and leveraging private financing to combine the companies. The expectation is that the merged firm can reduce costs, improve service via integration, and capture more of each transaction’s value than the two could separately.
What role does AI play in the Auctane-WWEX merger?
AI is a consideration but not the primary reason for the merger. Thoma Bravo and the companies have mentioned using data analytics and AI to optimize supply chains – for example, using predictive algorithms to choose the best shipping method or to streamline routes. However, the core motivator is operational synergy, not any specific AI technology. In other words, Auctane and WWEX are merging to combine software and logistics capabilities; AI will be a tool they use within that combined platform (to enhance automation, forecasting, etc.). It’s part of the broader industry trend of tech-enabled logistics, but the merger would likely be happening even without the AI hype. The real differentiator they seek is owning both the digital and physical aspects of shipping, which AI can help improve but cannot replace.
How will this merger affect ecommerce brands that use shipping software?
In the near term, brands using Auctane’s tools (like ShipStation) or WWEX’s services shouldn’t see immediate changes – you can continue shipping as usual. Over time, though, ecommerce sellers might be offered more integrated services. For example, you might get an option to use a unified platform that handles your order shipping and gives you WWEX-negotiated rates on UPS or freight, all in one place. This could simplify operations and possibly reduce costs if the combined company passes on savings. On the flip side, there may be fewer standalone software choices in the market as consolidation increases. Brands should remain vigilant about service quality and pricing. If you prefer a neutral multi-carrier approach, ensure that any platform you use continues to support all the carriers and methods you need. The merger is a sign that the industry is shifting toward consolidated solutions, so ecommerce companies should evaluate offers based on both software capabilities and the underlying logistics support. Always consider whether a provider has the network reach and leverage to truly help you save on shipping, beyond just providing a user-friendly interface.
Written By:
Rinaldi Juwono
Rinaldi Juwono leads content and SEO strategy at Cahoot, crafting data-driven insights that help ecommerce brands navigate logistics challenges. He works closely with the product, sales, and operations teams to translate Cahoot’s innovations into actionable strategies merchants can use to grow smarter and leaner.
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Shipping Surcharges Ecommerce: Why Rising Carrier Surcharges Are Quietly Rewriting Margins in 2026
In this article
6 minutes
- The Rise of Shipping Surcharges as a “Margin Tax”
- Common Carrier Surcharges and Their Impact on Ecommerce Shipping
- Why Carrier Surcharges Keep Climbing – And Aren’t Going Away
- The Quiet Impact on Ecommerce Margins (Hidden Fees Eroding Profit)
- The Visibility Gap: Why Many Brands Are Flying Blind on Surcharges
- Shipping Companies and Their Role in the Surcharge Landscape
- Ecommerce Business Models: Who Gets Hit Hardest by Surcharges?
- Strategies to Mitigate the Surcharge Squeeze
- Frequently Asked Questions
Introduction: In 2026, shipping surcharges are emerging as a permanent “margin tax” on ecommerce operations, quietly eroding online retailers’ profit margins. Once considered edge-case fees, carrier surcharges like fuel, residential delivery, and seasonal peak charges have become routine, and many brands lacking real-time visibility are blindsided by these extra costs.
Operations and logistics leaders can no longer treat surcharges as a minor nuisance; they now demand strategic attention. This article frames how rising carrier surcharges are rewriting ecommerce margins in 2026 and why it’s crucial to detect, forecast, and control these fees. We’ll dive into the types of surcharges impacting shipping costs, explain why they keep climbing, show the hidden impact on profit, and provide practical strategies (from packaging tweaks to carrier negotiations) that experienced operators use to defend their margins.
The Rise of Shipping Surcharges as a “Margin Tax”
Carrier surcharges have shifted from occasional add-ons to a significant, permanent cost factor in ecommerce shipping. In practice, accessorial fees and surcharges have become the real engines of parcel cost inflation, often outpacing the well-publicized annual rate increases. The base shipping cost, meaning the standard fee charged by carriers before any surcharges or additional fees, still matters, but it is no longer the number that determines profitability. Surcharges are now layered on top, and they are increasingly where carriers “find” revenue growth when base rates and volumes are constrained.
This is why operations teams feel like shipping costs are rising faster than their carrier contracts suggest. A published general rate increase might be a single digit percentage, but the actual invoice impact can be meaningfully higher once large package logic, residential fees, delivery area coverage, and fuel tables are applied across a real order mix. Surcharges have effectively become a margin tax because they attach to the shipment after the customer has already paid, and they are often discovered only at audit time, which is too late to recover the margin.
From the carrier’s perspective, surcharges serve three purposes: (1) offset costs that fluctuate or concentrate in specific lanes, (2) segment pricing by package characteristics and geography, and (3) reduce reliance on base rate increases that are easier for shippers to benchmark and negotiate against. For ecommerce brands, that adds up to an uncomfortable operational reality: you can “win” a rate negotiation and still lose margin if you are not controlling the surcharge surface area that sits downstream of the base rate.
Common Carrier Surcharges and Their Impact on Ecommerce Shipping
To grasp why surcharges are rewriting margins, it’s important to understand the common shipping surcharges and how they drive up shipping costs. These fees cover scenarios beyond the basic transport of a package, and each comes with a price tag that can erode profit if not managed. Here are some of the key surcharges hitting ecommerce shippers in 2026:
- Fuel Surcharges: Percentage-based or table-driven add-ons that change with fuel indexes and carrier formulas.
- Residential Delivery Surcharges: Flat fees for delivery to a home address, often increased annually and sometimes reclassified by address type.
- Delivery Area & Extended Area Surcharges: ZIP-based fees for remote, rural, or low-density delivery zones.
- Additional Handling Surcharges: Fees for heavy packages, unusual packaging, or dimensions that create handling friction inside carrier networks.
- Oversize / Large Package Surcharges: High-cost penalties for packages exceeding size thresholds or crossing cubic triggers.
- Address Correction Surcharge: Fees when carriers correct or complete invalid addresses, often tied to compliance rules.
- Peak Season and Demand Surcharges: Temporary surcharges during high-volume shipping periods that can become recurring programmatic costs.
- Other Accessorial Fees: Including signature, Saturday delivery, declared value, special pickup, and invoice-related fees.
As we can see, surcharges cover a wide range of scenarios, and they are no longer trivial. For many ecommerce shipments, one or several of these fees will apply, adding meaningful cost beyond the base rate. The operational mistake is treating these as “exceptions.” At scale, they become a predictable part of the shipping bill that needs to be measured, forecasted, and controlled with the same seriousness as COGS.
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See AI in ActionWhy Carrier Surcharges Keep Climbing and Why They Stick
It’s reasonable to ask why carriers charge so many surcharges and why those fees keep rising. The answer is not one single factor. It is a combination of cost structure, network optimization, and pricing strategy that has matured over the last several years. The key shift is that surcharges are no longer treated as rare “special situations.” They are now a standardized pricing layer that lets carriers monetize complexity.
Fuel is the clearest example. Fuel surcharges are not just a pass-through of fuel prices. They are defined by carrier tables and formulas that can be updated independent of the underlying fuel trend. When carriers change the calculation method, the impact can show up even if diesel is stable. That is why operators track both the market index and the carrier’s table changes, because the invoice outcome is driven by the carrier’s math, not your intuition.
Large package and handling fees are the second major driver. Carriers have invested heavily in automation, but big, awkward, and heavy parcels still create mechanical friction. These shipments consume conveyor capacity, require more manual touches, increase damage risk, and reduce route density. Instead of raising base rates across all shipments, carriers increasingly target the packages that stress the network. That is rational pricing, and it is exactly why ecommerce brands with bulky SKUs feel like they are subsidizing the entire parcel system.
Geography-based fees are the third layer. Delivery Area and Extended Area surcharges are designed to price in route inefficiency. Low-density ZIPs mean longer drive time per stop, lower drop density, and higher cost per delivered package. As carriers refine ZIP code lists and classification rules, more addresses get captured by these programs. If your brand ships nationally and you have meaningful rural exposure, geography-based surcharges become a structural margin issue, not a rounding error.
The operational takeaway is simple: once a surcharge becomes normalized, it rarely disappears. It might change names, shift thresholds, or move between categories, but it stays because it is a reliable pricing lever for carriers. Brands that treat surcharge escalation as “temporary noise” end up planning with false assumptions.
The Quiet Impact on Ecommerce Margins
Surcharges do the most damage when they arrive after the commercial decision has already been made. The customer has checked out. The shipping promise has been set. The order routing decision has been executed. Then the invoice lands with unexpected accessorials that turn what looked like a profitable order into a margin loss.
This is why surcharges “quietly” rewrite margins. The loss is distributed across thousands of orders and shows up as a gradual decline in contribution margin, not a single visible event. Teams often notice it as “shipping seems higher lately” rather than as a specific root cause. By the time finance reconciles the invoices, the brand has already shipped the orders and cannot retroactively fix packaging, address quality, or carrier selection.
Three patterns tend to create the biggest surprise:
- Pricing assumes average cost, but invoices reflect distribution tails. A small percentage of oversize orders can account for a disproportionate share of surcharge spend.
- Operational decisions create surcharge triggers indirectly. A packaging change, a new kitting process, or a warehouse carton shortage can push packages over dimensional thresholds.
- Geography shifts without anyone noticing. A new paid channel, marketplace expansion, or campaign can change your destination mix and increase delivery area exposure.
When you combine those patterns with free shipping offers or tight shipping subsidies, surcharges become a direct threat to your CAC payback model. This is not a carrier problem. It is an operational measurement problem. If you cannot see surcharge drivers in near real time, you cannot control them at the pace the business is moving.
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See the 21x DifferenceThe Visibility Gap: Why Brands Fly Blind on Shipping Surcharges
Most mid-market ecommerce brands are not flying blind because they are careless. They are flying blind because surcharge data is fragmented across systems and arrives late. Labels are created in the shipping tool. Addresses live in the ecommerce platform. Cartons and weights live in WMS workflows. Surcharges live on invoices that show up days or weeks later. Without instrumentation, you cannot connect the invoice outcome to the operational decision that caused it.
This creates three common failure modes:
- Invoice-only detection. Teams discover surcharges only after reconciliation, which means the learnings apply to last month’s shipments, not today’s.
- Spreadsheet forecasting. Finance attempts to model surcharges using static assumptions even as carrier tables, thresholds, and ZIP lists change.
- No trigger-level attribution. Even when teams know surcharge totals, they cannot attribute them to specific SKUs, cartons, lanes, or warehouses.
Closing the visibility gap requires more than “better reporting.” It requires a feedback loop that ties surcharge outcomes to shipment-level signals like dimensional weight, packaging selection, address type, service level, zone, and delivery geography. If you can attribute surcharge spend to the drivers, you can change the drivers.
If your team regularly fights late deliveries and billing surprises, it is worth tightening your exception workflows as well. This guide is useful context: shipment exception management for ecommerce shipping.
Shipping Companies and Their Role in the Surcharge Landscape
Shipping companies define surcharge structures as a way to price operational variability. Fuel volatility, labor cost swings, peak capacity constraints, and the rise of residential delivery all create network stress. Surcharges are the mechanism carriers use to price that stress without rewriting base rates every time conditions change.
For ecommerce operators, the key is to understand that carriers are optimizing their networks for cost and service reliability. Surcharges are used to discourage certain shipment profiles, such as very large parcels or low-density deliveries, or to ensure those profiles are priced high enough to remain economically viable.
This matters because it reframes how you respond. The goal is not to argue with the existence of surcharges. The goal is to control your exposure by designing shipping operations that reduce surcharge triggers. That is a solvable operational problem, but only if you treat surcharges as measurable inputs rather than unpredictable penalties.
Which Ecommerce Business Models Get Hit Hardest
Not every ecommerce model experiences surcharge pressure equally. The hardest-hit brands tend to share one of the following characteristics:
- Free shipping or flat-rate shipping baked into merchandising. When shipping is subsidized, surcharge growth directly compresses margin unless pricing is adjusted.
- Bulky catalog or high dimensional weight exposure. Home goods, wellness equipment, large apparel bundles, and subscription kits often drift into oversize triggers as assortments change.
- High residential percentage. Most DTC brands ship primarily residential, so residential and delivery area programs land on a large share of shipments.
- Long-tail geographic exposure. If your customer base is widely distributed, a meaningful percentage of shipments will fall into extended delivery areas.
- High returns and reships. Each extra label creates another opportunity for address correction, residential add-ons, or peak fees to attach.
The operational consequence is that “shipping cost per order” averages are misleading. Two brands with the same AOV can have radically different margin outcomes based on package profile and destination distribution. That is why surcharge tooling is a competitive advantage in 2026. It lets you segment the portfolio and make decisions SKU-by-SKU and lane-by-lane.
For brands exposed to rising ground costs, this related breakdown is useful: how ecommerce teams combat higher ground shipping costs.
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Cut Costs TodayStrategies to Mitigate the Surcharge Squeeze
Surcharges cannot be eliminated entirely, but they can be controlled. The strongest operators treat surcharge mitigation as a systems problem, not a one-time carrier conversation. The right mix is usually (1) reduce triggers, (2) improve detection, and (3) renegotiate from a position of data.
1) Packaging and cartonization discipline
Large package and additional handling fees are often driven by a small number of carton choices that push parcels across thresholds. Tightening packaging discipline usually yields the fastest payoff because it changes the physics of the shipment. Practical moves include using more carton sizes, enforcing carton selection rules in WMS, reducing void fill that inflates dimensions, and auditing “emergency cartons” that warehouses use when preferred boxes run out.
The important operator insight is that surcharge exposure often comes from inconsistency. A single SKU can ship in three different cartons depending on location, packer habit, or inventory constraints. That variability turns surcharge forecasting into guesswork. Standardize the pack plan first, then optimize it.
2) Address quality and classification control
Address correction fees are the most avoidable surcharge category, and they often mask upstream issues like poor form validation, missing apartment numbers, or customer autofill errors. Implementing strict address validation at checkout and re-validating before label creation can reduce both correction fees and delivery exceptions.
Residential and delivery area exposure also benefits from better classification. If your systems cannot reliably categorize address type and destination geography before label purchase, you are choosing carriers and services with incomplete information. That is a solvable problem with the right data enrichment.
3) Carrier mix and service-level optimization
Carrier diversification is not about chasing the cheapest label. It is about matching shipment profiles to the carrier best suited for them. Some carriers price oversize more aggressively. Others have different delivery area coverage. Regional carriers can reduce delivery area fees in certain lanes. Postal consolidators can lower residential exposure for lightweight parcels. The win comes from routing logic that selects a service based on total expected cost, not just base rate.
4) Contract negotiation using surcharge reality, not averages
Negotiation outcomes improve when you bring evidence of surcharge distribution and the operational steps you are taking to control it. Carriers respond to shipper maturity. If you can show that you understand your large package mix, your rural exposure, and your actual billed weight patterns, you can negotiate more targeted concessions. This is where many mid-market brands underperform because they negotiate on volume tiers without quantifying the accessorial layer that actually drives invoice totals.
This negotiation guide is helpful background for building that posture: shipping rate negotiation for small and mid-sized businesses.
5) Automation as the core mitigation lever
The biggest structural advantage in 2026 is automation that detects and controls surcharges in near real time. Specifically, automation should do four things:
- Detect: flag shipments likely to trigger large package, additional handling, residential, or delivery area fees before label purchase.
- Forecast: estimate total landed shipping cost using the correct carrier tables, not static averages.
- Route: select carrier and service based on total cost and SLA, including expected accessorial exposure.
- Audit: compare billed surcharges to expected surcharges to catch misapplied fees and recurring root causes.
Without that loop, surcharge management becomes reactive. You find the problem in the invoice, then you try to fix it operationally weeks later, and the business has already moved on. Automation closes the time gap between cause and effect, which is what makes it the most durable mitigation lever.
Frequently Asked Questions
What are shipping surcharges and why do carriers charge them?
Shipping surcharges are additional fees applied on top of base shipping rates to cover specific operational conditions or shipment attributes, such as fuel volatility, residential delivery, remote locations, special handling, or oversized packages. Carriers use them to price variability and network friction without applying one blanket increase to every shipment.
What are the most common shipping surcharges ecommerce brands should monitor?
The most common surcharge categories that consistently impact ecommerce shipments are fuel surcharges, residential delivery fees, delivery area and extended area surcharges, additional handling fees, large package or oversize surcharges, and address correction fees. Peak and demand surcharges can also become material during high-volume periods.
Why do surcharges impact profit margins more than base rate increases?
Base rates are typically modeled in shipping budgets and pricing decisions, but surcharges often show up after the shipment decision is already made. They also concentrate on the most expensive shipment profiles, such as oversized cartons or rural lanes, which means a relatively small share of orders can create a disproportionate share of total shipping cost inflation.
How can ecommerce businesses manage carrier surcharges?
Businesses can manage surcharges by reducing trigger conditions (packaging and cartonization discipline), improving address quality and validation, diversifying carriers and services by shipment profile, negotiating contracts with surcharge distribution data, and implementing automation that detects and forecasts surcharge exposure before label purchase.
What does “real-time surcharge visibility” actually mean?
Real-time visibility means you can identify which shipments are likely to trigger specific surcharges before you buy the label, and you can attribute billed surcharges back to the operational drivers that caused them (SKU, carton, warehouse, lane, service, address type). That lets teams fix root causes quickly instead of discovering issues only during invoice reconciliation.
What is the first operational change that typically reduces surcharge spend?
For most brands, the fastest initial win is tightening packaging consistency and carton selection rules. A small reduction in dimensional weight exposure and large-package triggers often produces outsized savings because those surcharges are high and attach to the most expensive shipments.
Written By:
Manish Chowdhary
Manish Chowdhary is the founder and CEO of Cahoot, the most comprehensive post-purchase suite for ecommerce brands. A serial entrepreneur and industry thought leader, Manish has decades of experience building technologies that simplify ecommerce logistics—from order fulfillment to returns. His insights help brands stay ahead of market shifts and operational challenges.
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The Ecommerce Playbooks That Broke in 2025 (from Ugly Talk NYC)
If you’re still running your brand like it’s 2020: open rates as your North Star, Pixel-only attribution, and “more SKUs = more sales”, you’re not just leaving money on the table; you’re flying blind.
This piece is a field guide to what stopped working and what operators are doing instead in 2025. It’s tough love, drawn from the Ugly Talk NYC session, “Building Profitable Ecommerce in a Downward Market”, held at NomadWorks in Times Square, New York, in August 2025, and validated with industry data, so founders can course-correct in a market that’s very different from five years ago.
Speakers at Ugly Talk NYC — Meet the Panelists Featured Here
- Manish Chowdhary — Founder & CEO, Cahoot (panel moderator)
- London Glorfield — Founder, Kickback (screenless electronics)
- Maya Juchtman — Senior Director, Marketing & Partnerships, Roswell NYC
- Sabir Semerkant — Founder, Growth by Sabir, helped drive $1B+ in ecommerce growth
(Detailed bios appear at the end of this article.)
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I'm Interested in Saving Time and Money1) Meta Over-Reliance Collapsed
The narrative is overly simplified to “iOS killed Facebook tracking.” The real story: compounding privacy changes across devices and browsers eroded deterministic tracking and last-click storytelling:
- Apple’s App Tracking Transparency (ATT) made cross-app tracking opt-in in 2021, permanently constraining the signal from iOS users. Meta publicly acknowledged conversion under-reporting after ATT (roughly ~15% at first, later ~8% as fixes rolled out).
- Browser defaults now block cross-site tracking whether you run apps or not: Safari’s Intelligent Tracking Prevention has fully blocked third-party cookies since 2020; Firefox’s Enhanced Tracking Protection blocks cross-site tracking by default (with Total Cookie Protection rolled out to all users in 2022).
- Chrome in 2025: After years of Privacy Sandbox testing, Google pivoted: Chrome is not proceeding with a one-size cookie phase-out, moving instead to a user-choice model, removing the “hard stop” many hoped would normalize alternatives. Regulators also signaled they no longer need ongoing commitments tied to deprecation. Translation: third-party cookies persist, but fragmentation is the new normal.
When you depend on one channel’s pixel to tell you the truth, you get whipsawed by platform and policy shifts. As Sabir framed it, treat channels like a diversified portfolio, shift dollars in real-time as signal or platform risk changes, not months later.
“Remember that right after the election, right, that weekend, there were so many creators in tears saying goodbyes on TikTok. And then that Saturday night into Sunday, it was turned back on, right? So that kind of stuff, your business cannot rely on those kinds of things. If that were to happen to me, I would say, ‘Okay, you know what, doesn’t matter. I’m gonna shift my attention over here, right, and I’m gonna just reallocate my time, my energy, my budget towards this, this other set. I don’t have to worry about this one issue that’s happening because it doesn’t have to be a full-on shutdown like TikTok, right? It could be just TikTok rolled out an update, and there was a problem. — Sabir.
What replaces Pixel-only?
A hybrid tracking stack: platform pixel + server-side signals.
- Meta Conversions API (CAPI): Send deduplicated events server-to-server with event_id so the same conversion isn’t counted twice. This is now baseline, not “advanced.”
- Google Enhanced Conversions / offline imports: Hash first-party emails/phones when a purchase happens to improve match rates and bidding; Google is continuing to add flexibility to conversion imports. If you target the EEA/UK/CH, Consent Mode v2 (with a certified CMP) is required to maintain ad features.
Also, remember the baseline privacy gap; roughly a third of internet users use ad blockers at least sometimes, further degrading client-side measurement.
Bottom line: You can’t manage what you can’t measure. Build server-side redundancy, deduplicate, and expect platform models to “fill in” gaps, then validate with lift tests and surveys.
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Email is still a profit engine, but the scoreboard you’ve been staring at is broken.
- Apple Mail Privacy Protection (MPP) preloads tracking pixels regardless of actual opens, thereby inflating open rates and obscuring location and timing data. Apple’s own documentation and reputable email firms agree that opens are no longer a reliable metric. Litmus estimates that over half of opens happen on devices with MPP enabled.
- That’s why operators see 30 – 35% “opens” but real engagement is more like ~10%, exactly what came up at Ugly Talk. The fix: stop optimizing to opens, and tighten to engagement segments.
What to do instead:
- Track clicks, placed orders, and revenue per recipient; use click-to-delivered and unengaged suppression to protect deliverability. Postmark and Constant Contact both emphasize the shift away from open-driven automations.
- If your ESP supports it, use first-party events (add-to-cart, checkout started) as triggers and zero-party data to personalize; no pixel required.
Spray-and-pray is a deliverability death spiral. Trim dead weight and measure behavior, not proxy opens. (Learn more about retention math and LTV/CAC loops.)
3) SKU Bloat Drains Cash and Focus
In a world of higher shipping, tariffs, and tighter cash, SKU creep kills margins and operational agility. The panel’s blunt take: brands with 30 orders and 300 SKUs are waving red flags, and “16 colors doesn’t make you a better parent.” Focus on a hero, then earn the right to expand.
“If you have a brand that you think that, oh, I should have 16 colors, like, why. Why would you? Oh, because I did Semrush and my competitive Google shopping. The intern I hired gave me a report stating that we have three colors, while our competitors have 16 to 32 colors. On average, they have about 24 colors. We have only three. Maybe that’s the problem. So, let’s add 16 other colors to our list to at least be in the playing field. It’s like having 16 more children, but you think that’s going to make you a better parent? It doesn’t make you a better parent at all. In fact, the unit economics: now you have to pay square footage to put that inventory in a warehouse. You have to pay for fuel to transport it from its source to the transfer point. And now, what did you do? You went, you took out a loan to buy that inventory, and now that inventory is dead, sitting over there with nobody buying it. Nobody cares. Remember, there’s one great quote by Henry Ford, the founder of the car company: “The consumers can have any color car they want as long as it’s black”. — Sabir.
Why the old playbook broke:
- Fragmented demand inflates MOQs, inventory carrying, returns complexity, and content ops (photos, PDP copy, reviews).
- Stockouts reset ad learning and nuke momentum; you pay twice when campaigns relearn.
What to do instead:
- Ruthless SKU rationalization: keep hero velocity > everything. Tie launch cadence to supply certainty and gross margin thresholds.
4) AI Content Flood = Diminishing Returns
London pointed out: “More posts” is not the strategy. Consumers, especially Gen Z, spot AI instantly and are rewarding thoughtful, crafted pieces over volume. One handcrafted video outperformed 300 AI-generated videos by 100 times in the panel’s experience.
AI is an accelerant, not an autopilot. Sabir advises sellers to treat it like brilliant interns from MIT, who still need direction. Use AI to draft, summarize, and QA, but creative judgment, community intimacy, and context are the moat.
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Explore Fulfillment NetworkThe New Playbook: Measurement and Focus
Here’s the operator checklist our team sees working right now:
A. Rebuild tracking for reality
- Meta: Pixel + CAPI with event_id deduplication; maximize Event Match Quality.
- Google: Turn on Enhanced Conversions (account-level now supported); if you have EEA/UK/CH traffic, implement Consent Mode v2 with a certified CMP.
- Channel diversification: Shift budgets when platform risk arises (policy shifts, bugs, legal issues). Manage channels like a portfolio—reallocate, don’t react months later.
B. Replace “opens” with engagement
- KPIs: unique clicks, placed orders, rev/recipient, unsub rate, inbox placement.
- Maintain unengaged suppression and sunset rules; rebuild win-backs around clicks or site behavior, not opens.
C. Fewer, better SKUs
- Tie assortment decisions to fully loaded unit economics (landed cost, packaging, mailers, warehouse space). Kill variants that stall; scale what compounds.
D. Aim content at “would-watch even if it wasn’t branded”
- Scripted, functional pieces beat floods of AI filler. Utilize AI to expedite specific parts of the workflow.
E. Validate beyond platforms
- Use post-purchase surveys, geo-lift, and holdout tests where possible to sanity-check modeled platform ROAS.
Frequently Asked Questions
Did iOS “kill” Facebook ads?
No, but it killed the old measurement playbook. ATT cut cross-app tracking; browsers block cross-site cookies by default; ad blockers further reduce client-side signals. Meta added CAPI and modeling to compensate, but you must send server-side events and validate with incrementality tests.
Are open rates dead?
For decision-making, yes. MPP preloads images, inflates open times, and hides geolocation/time. Track clicks, orders, and rev/recipient; rebuild automations around behavior, not opens.
Should I still prepare for third-party cookies to vanish?
You should prepare for fragmentation rather than a single cutover. Safari and Firefox already block cross-site tracking by default; Chrome abandoned a hard deprecation and is shifting to user choice. Either way, hybrid measurement and first-party data win.
Where does CAC fit in 2025?
CAC isn’t one number anymore; it’s layered by funnel position, creative, and channel.
Speaker Bios
Manish Chowdhary — Manish Chowdhary is the Founder & CEO of Cahoot, the most comprehensive post-purchase logistics platform for ecommerce brands. We help merchants scale profitably with a bundled suite of services that includes:
- Fast, cost-effective fulfillment (1-day and 2-day nationwide coverage)
- AI-powered multi-warehouse shipping software that selects the cheapest label automatically
- An industry-first peer-to-peer returns solution that eliminates return shipping and restocking costs
With over 100 warehouses and advanced shipping automation, we help brands maintain control, boost speed, and cut logistics costs without the overhead of traditional 3PLs. I’m passionate about helping ecommerce businesses grow smarter. If you’re looking to improve your margins, delight customers, and future-proof your logistics, let’s connect.
My work has been recognized with multiple industry accolades, most recently winning the SaaStock USA Global Pitch Competition 2024. I’m passionate about leveraging technology and collaboration to push the boundaries of e-commerce and logistics, creating new opportunities for merchants worldwide.
London Glorfield — London is a founder and creative strategist who’s built at the intersection of culture and product his entire career. A former RCA-signed artist, he previously ran a creative direction firm and a Squarespace-style software startup. He is currently reimagining consumer electronics with Kickback.world, a fashion-forward audio brand rooted in youth culture and design.
Maya Juchtman — Maya is a creative marketing strategist and partnerships leader known for blending brand storytelling with performance. As Senior Director of Marketing & Partnerships at Roswell NYC, a Webby Award–winning Shopify Plus agency, she’s helped brands like Brixton, Hyperlite, and Curious Elixirs scale through thoughtful strategy and standout campaigns. With a background in customer experience and leading brands through start-up to acquisition, she brings a human-first, culturally aware lens to every project, building community, driving growth, and pushing the boundaries of what digital marketing can be.
Sabir Semerkant — Sabir is the go-to eCommerce growth strategist, credited with over $1B in revenue for 200+ brands from Canon to Sour Patch Kids. Backed by Gary Vee and Neil Patel, Sabir’s Rapid 2X method delivers 2X growth in 12–18 months profitably. Since 2024, it’s powered 70+ brands across 17 industries with an average 108% lift. His Rapid 2X Protocol is the unfair advantage for any eCom brand with product–market fit, engineered to scale revenue and profit even in down markets. Want real talk? Sabir reveals why most brands will fail in 2025 and exactly how to make sure yours isn’t one of them.
Written By:
Jeremy Stewart
Jeremy Stewart leads customer success at Cahoot, helping merchants achieve high-performance logistics through smart technology and process optimization. With a background in both ecommerce operations and client services, Jeremy ensures that every merchant using Cahoot gets measurable results—whether they’re scaling from one warehouse to many or managing complex returns.
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5 Brutal Truths About Ecommerce Profitability (from Ugly Talk NYC)
In this article
14 minutes
- Meet the Panelists Featured Here
- Brutal Truth #1: The ZIRP Era Is Dead
- Brutal Truth #2: Old Tracking Playbooks Are Broken
- Brutal Truth #3: CAC Math Is a Lie in 2025
- Brutal Truth #4: Less Is More — SKUs, Content, Channels
- Brutal Truth #5: AI Will Not Save You Without Context
- The Playbook That Replaces the Old One
- Full Session Video
- Frequently Asked Questions
- Speaker Bios
In August 2025, founders and operators packed a standing room only space at NomadWorks in Times Square, New York City for Ugly Talk NYC: Building Profitable Ecommerce in a Downward Market, a panel designed to cut through the noise. No “growth hacks.” No feel-good fluff. Just raw, unfiltered truth about why ecommerce profitability has never been harder, and what you need to do about it now.
If you’re reading this, you’re not looking for theory. You want survival strategies. This article distills the 5 brutal truths shared on stage, each a direct challenge to the old playbooks that no longer work. It distills the sharpest insights from blends them with current data and outside examples, and leaves you with a focused playbook for the second half of 2025. Use it as the pillar article that spawns your clips, carousels, emails, and deep-dives.
Meet the Panelists Featured Here
- Manish Chowdhary — Founder & CEO, Cahoot (panel moderator)
- London Glorfield — Founder, Kickback (screenless electronics)
- Maya Juchtman — Senior Director, Marketing & Partnerships, Roswell NYC
- Sabir Semerkant — Founder, Growth by Sabir, helped drive $1B+ in ecommerce growth
(Detailed bios appear at the end of this article.)
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I'm Interested in Saving Time and MoneyBrutal Truth #1: The ZIRP Era Is Dead
Panel moderator Manish Chowdhary opened with a stark reminder:
“For a long time until very recently we were in a zero interest rate phenomenon and money was easy, money was flowing. When that happens, fundamentals go out the door which means weak businesses thrive or appear to thrive. There are 10 ecommerce darlings … Stitch Fix, Grove Collaborative, even Olaplex are penny stocks. They probably won’t be trading on the New York Stock Exchange for much longer now.”
For a decade, zero interest rates hid a lot of sins. That era really is over. The Federal Reserve kept policy tight through mid-2025 as inflation and growth data stayed mixed; capital is scarce again and the bar for profitability is higher. Translation: if your growth story depends on forever-cheap money, it is not a story anymore.
At the same time, the rules of trade changed. In 2025 the White House directed sweeping tariff actions, including reciprocal tariffs, a new tariff commission, and orders to suspend de minimis entry benefits to certain countries for national security and unfair trade concerns. If you import, your landed-cost model changed whether you noticed or not. Plan pricing, assortment, and cash cycles accordingly.
Panelists underscored how the “free money plus cheap acquisition” era minted fragile brands.
“Weak businesses thrived under cheap money. Today, those same brands say ‘I don’t want to be like me.’” — Manish.
This is a hard reset: brands that looked unstoppable during the ZIRP boom are collapsing. A harsh reminder that product love without durable unit economics does not keep the lights on. The takeaway is not doom; it is clarity. Rebuild your plan around cash margin, inventory turns, and repeat behavior instead of “fundraising as a strategy.”
What to do next:
- Re-forecast demand with tariff-inclusive costs, not “last year plus five percent.” Build A/B/C scenarios that stress test your cash conversion cycle under higher duties and slower demand.
- Renegotiate with suppliers using tariff math as leverage. Lock freight earlier and shorten cash exposure windows where possible.
- Tighten SKU economics: kill long-tail variants that tie up working capital and complicate replenishment. We revisit SKU discipline in Brutal Truth #4.
Brutal Truth #2: Old Tracking Playbooks Are Broken
The story is not “iOS killed the Pixel” and that is the end. It started with Apple’s App Tracking Transparency (ATT) and Mail Privacy Protection, then spread to browser privacy defaults, ad blockers, and a shifting timeline for third-party cookies in Chrome. Treating the Meta Pixel as gospel in 2025 is how you fly blind.
Email metrics are distorted too. The panel called out inflated open rates: those “35% opens” many teams celebrate are not real if a big chunk of your audience is on Apple Mail with MPP. Litmus and others confirm that MPP obscures open behavior and that “open” is no longer a reliable KPI. Expect inconsistent handling of MPP across email service providers and move your reporting toward clicks, conversions, revenue, and deliverability health.
“You need to manage ecommerce like your Charles Schwab or Fidelity account, money management first, not blind ad spend.” — Sabir.
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Get My Free 3PL RFPThe fix is a hybrid, first-party stack:
- Pixel + Conversions API (CAPI) with deduplication. Send server-side events, include event IDs, and deduplicate against browser events. This is Meta’s own recommendation for restoring signal quality post-ATT.
- Aggregated Event Measurement and prioritized web events, plus server-to-server purchase reporting, to stabilize performance reporting.
- Email reality check: prune disengaged segments, build exclusion rules, and monitor sender reputation daily. Spray-and-pray is a deliverability death spiral.
- Measure beyond last-click. Use modeled attribution and incrementality testing where possible; treat platform-reported ROAS as a directional input, not financial truth.
“I just looked at a few accounts recently…their deliverability [was] horrible. But they came to me and they were like, ‘Oh I’m seeing 35% open rates. 30% open rates, that’s fine, right?’ Actually no. If you’re sending to lists and you’re not doing exclusions and you’re not actually thinking about Apple privacy which auto inflates. So those numbers, that open rate, that’s not real, that’s Apple privacy, Google and Hotmail inflating that. So your open rate is actually probably going to be more like 10.” — Maya.
Why this matters: brands that relied on Meta Pixel lost signal, misallocated budget, and watched revenue wobble when the ground shifted. Hybrid tracking, server events, and healthier email lists (even is leaner) help you defend spend and redirect dollars faster.
Brutal Truth #3: CAC Math Is a Lie in 2025
“CAC isn’t one number anymore, layered strategy required.” — Summary of Maya’s segment.
CAC used to be a single dashboard tile. Now it is a portfolio of acquisition costs across funnel stages and channels. Top-of-funnel stories are expensive and slow, but they seed cheaper retargeting, stronger LTV, and more resilient cohorts. Roswell’s work with Hyperlite illustrates this: brand and experience up top, brand-aware retargeting down-funnel, and a different CAC expectation for each layer.
When you treat CAC as a single number, you are tempted to shut off expensive awareness that actually lowers blended CAC over time. In 2025, the math that matters is blended CAC to contribution margin by cohort, with inventory and cash timing in the same equation.
A tighter model:
- Top-funnel CAC: higher; track assist value, search lift, and branded queries.
- Mid-funnel CAC: creative-led; expect decays in 3 – 6 weeks as creative burns out. Rotate on a schedule.
- Bottom-funnel CAC: cheaper retargeting; cap frequency, and watch saturating segments.
- Community CAC: Discord, events, direct mail; small volumes, high LTV, exceptional payback.
Finally, build a channel-shift reflex. If 70% of spend sits on Meta and performance degrades, rebalance to 70% Google, 30% Meta overnight; the panel was blunt that single-platform dependency is a solvency risk now.
Brutal Truth #4: Less Is More — SKUs, Content, Channels
SKUs. The room agreed: assortment bloat is a silent margin killer. If you have “30 orders and 300 SKUs,” you do not have a marketing problem, you have a focus problem. Ship the hero, kill the laggards, and stop coloring the T-shirt sixteen ways.
“If you can’t make your hero product succeed in a big way, these chotchkes are not going to save you. That’s just a pure distraction. And I can tell you from my own personal experience, we throw away that stuff because nobody wants it. We can’t even get pennies on the dollar. The brand may associate such deep emotional and financial value to that, but it has zero or very little value outside. So you have to be very, very consider it in your product skus election. Just because one customer says, I wanted a small burgundy, that is not a reason to produce that in small burgundy.” — Manish.
Outside the room, SKU discipline shows up in the data. Post-pandemic, CPG leaders that rationalized assortments saw service levels recover and productivity improve; fewer SKUs meant fewer changeovers and better on-shelf availability. Ecommerce is no different: fewer variants mean faster replenishment, fewer stockouts, and cleaner creative.
Content. Volume for volume’s sake is out. London put it plainly: Kickback moved from “posting 10 times a day” to scripted, value-driven content, because audiences are saturated and can sniff filler. Manish’s team blasted out 300 AI-generated videos in a week and one handcrafted video outperformed all of them combined by ~100x. That is not a cute anecdote, it is a strategy correction: quality over volume.
Channels. Kickback treats channels like a portfolio. TikTok is growth equity, Instagram is the S&P, email is for committed audiences, Discord and physical mail are VIP touchpoints. That last one matters. London’s team sends text-first emails and literal playlists, and then backs it up with quarterly handwritten notes. Community intimacy beats blast discounts.
Direct mail is back in the mix. Panelists see postcards and letters driving meaningful second-purchase behavior; Sabir cited 14 – 20% response rates in recent campaigns and argued that, for the first time in years, a stamped postcard can be cheaper than a Meta click. Meanwhile, stamp prices rose again in July 2025 to 80¢ for a First-Class Forever stamp, which is still a modest input compared to volatile CPCs. The point is not that mail is “cheap,” it is that it can be predictable, targeted, and human in a way digital often is not.
Brutal Truth #5: AI Will Not Save You Without Context
“AI is like hiring interns from MIT, University of Penn, Harvard, or Yale, really smart, really smart kids, right? Phenomenal. Very intelligent. They have amazing intelligence, but they just don’t know how to use it. It’s my job to guide them.” — Sabir.
Generative tools are incredible force multipliers, and they also flood the feed with sameness. When everyone can ship 100 posts a day, quality becomes the only differentiator. That is visible in search as well. Google’s evolving guidance keeps prioritizing E-E-A-T (experience, expertise, authoritativeness, and trust) and people-first content; gaming systems with AI-written mush is a fast track to nowhere.
London’s read on Gen Z is instructive: they spot AI instantly and reward brands that feel human. Use AI to research, draft, and speed checks, then layer on your voice, data, and video craft. Manish’s 100x lesson is the headline here, and it pairs with a second one from the panel: optimize for AI discovery, not just traditional SEO. Package your catalogs and content so LLMs can “see” them, test queries in AI products, and partner with publishers those models cite. That is the new distribution.
“The reality on the ground is that most brands, they’re so obsessed with paying Meta ads and Google Ads that they’re not focused on the organic strategies where they need to be developing. Especially AI. SEO is a thing right now where you can, you can package your content and actually feed it so that it can get discovered by AI engines. Because that’s where we are going, you know. And if you are optimizing your business based on what worked in 2022, that was a different part, different world at that time, right? It doesn’t exist. That world doesn’t exist right now.” — Sabir.
Scale Faster with the World’s First Peer-to-Peer Fulfillment Network
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Explore Fulfillment NetworkThe Playbook That Replaces the Old One
1) Operate like a money manager. Review spend daily; shift between channels quickly; protect cash; model tariffs explicitly; keep a rolling 13-week cash forecast.
2) Rebuild measurement. Pixel + CAPI with deduplication; AEM-prioritized events; click- and conversion-centric email analytics; full-funnel blended CAC.
3) Design for repeat behavior. Fewer products, tighter variants, faster replenishments, and community touchpoints that earn a second purchase.
4) Make fewer, better assets. Script, storyboard, and ship formats the audience would watch even if your brand name disappeared.
5) Treat physical mail and in-channel communities as profit centers. When done thoughtfully, they compound LTV while ad channels churn.
Full Session Video
[Embed the full recording here once live on YouTube or Vimeo. Use chapters by question for skimmability.]
Frequently Asked Questions
What is the single biggest profitability mistake brands are making in 2025?
Treating growth like it is still 2019. Cheap money and cheap acquisition masked weak unit economics. Today, you must run a tariff-aware P&L, operate with cash discipline, and design your plan around repeat purchase, not just net-new.
How exactly has Apple changed the way we measure marketing?
ATT and MPP broke legacy habits. App-level tracking is limited; email “opens” are inflated or meaningless. Shift to first-party data, Pixel + CAPI with deduplication, prioritized events, and conversion-level outcomes. Make “deliverability health” and “incremental revenue” your email KPIs.
Are third-party cookies still going away?
Chrome’s timing has been fluid and subject to regulatory review, but the direction is the same: less cross-site tracking, more privacy-preserving APIs. Plan as if third-party cookies are not dependable and invest in first-party audiences and server-side measurement now.
Why is direct mail suddenly on everyone’s roadmap?
Because it creates a human moment, is targetable, and, for many segments, has become cost-competitive with paid clicks again. Stamp prices rose to 80¢ in July 2025, yet response rates on targeted house-file mailings can be multiples of cold digital traffic. Use it for high-value cohorts and second-purchase nudges.
What does “Less Is More” mean in practice?
Cut SKUs aggressively, ship only what you can replenish, and make media you are proud to sign. Treat content and assortments like constrained resources. The panel’s best-performing video was a single crafted piece, not 300 AI clones.
How should I think about CAC now?
Make CAC layered: top-funnel story costs more and pays off in retargeting and LTV; mid-funnel burns out faster; bottom-funnel is cheaper but finite. Report blended CAC to contribution margin by cohort, not a single number.
Is email still worth the work?
Yes, but only if you run it like deliverability-first CRM. Build exclusions, cull dead segments, personalize copy, and measure clicks, conversions, and revenue. “Set and forget” is how you get clipped in 2025.
Speaker Bios
Manish Chowdhary — Manish Chowdhary is the Founder & CEO of Cahoot, the most comprehensive post-purchase logistics platform for ecommerce brands. We help merchants scale profitably with a bundled suite of services that includes:
- Fast, cost-effective fulfillment (1-day and 2-day nationwide coverage)
- AI-powered multi-warehouse shipping software that selects the cheapest label automatically
- An industry-first peer-to-peer returns solution that eliminates return shipping and restocking costs
With over 100 warehouses and advanced shipping automation, we help brands maintain control, boost speed, and cut logistics costs without the overhead of traditional 3PLs. I’m passionate about helping ecommerce businesses grow smarter. If you’re looking to improve your margins, delight customers, and future-proof your logistics, let’s connect.
My work has been recognized with multiple industry accolades, most recently winning the SaaStock USA Global Pitch Competition 2024. I’m passionate about using technology and collaboration to push the boundaries of ecommerce and logistics and create new opportunities for merchants worldwide.
London Glorfield — London is a founder and creative strategist who’s built at the intersection of culture and product his entire career. A former RCA-signed artist, he previously ran a creative direction firm and a Squarespace-style software startup. He is currently reimagining consumer electronics with Kickback.world, a fashion-forward audio brand rooted in youth culture and design.
Maya Juchtman — Maya is a creative marketing strategist and partnerships leader known for blending brand storytelling with performance. As Senior Director of Marketing & Partnerships at Roswell NYC, a Webby Award–winning Shopify Plus agency, she’s helped brands like Brixton, Hyperlite, and Curious Elixirs scale through thoughtful strategy and standout campaigns. With a background in customer experience and leading brands through start-up to acquisition, she brings a human-first, culturally aware lens to every project, building community, driving growth, and pushing the boundaries of what digital marketing can be.
Sabir Semerkant — Sabir is the go-to eCommerce growth strategist, credited with over $1B in revenue for 200+ brands from Canon to Sour Patch Kids. Backed by Gary Vee and Neil Patel, Sabir’s Rapid 2X method delivers 2X growth in 12–18 months profitably. Since 2024, it’s powered 70+ brands across 17 industries with an average 108% lift. His Rapid 2X Protocol is the unfair advantage for any eCom brand with product–market fit, engineered to scale revenue and profit even in down markets. Want real talk? Sabir reveals why most brands will fail in 2025 and exactly how to make sure yours isn’t one of them.
Written By:
Jeremy Stewart
Jeremy Stewart leads customer success at Cahoot, helping merchants achieve high-performance logistics through smart technology and process optimization. With a background in both ecommerce operations and client services, Jeremy ensures that every merchant using Cahoot gets measurable results—whether they’re scaling from one warehouse to many or managing complex returns.
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USPS Harmonized Tariff Code Requirement Starts September 2025
Starting September 1, 2025, every U.S. exporter must include a harmonized tariff code (HTS code) or Schedule B number on USPS international shipments. For years, merchants could get away with vague product descriptions, but now the Harmonized System (HS) is the law of the land. This isn’t just bureaucratic red tape, it’s a restructuring of how international trade data flows through customs, taxes, and shipping.
The System Behind the Codes
At its core, the HS code system is a global classification system governed by the World Customs Organization (WCO). The first six digits are universal across all countries. Beyond that, nations tack on their own rules:
- The U.S. uses the Harmonized Tariff Schedule (HTS) for imports.
- The Census Bureau oversees Schedule B codes for U.S. exports.
The result? Your ten-digit codes must match precisely, or your traded products get flagged. Misclassification leads to delays, penalties, or worse, lost shipments.
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See AI in ActionWhy USPS Is Forcing the Issue
Other carriers (FedEx, UPS, DHL) have long required these codes, but USPS gave merchants a free pass. That ends in 2025. Why? Two reasons:
- Data accuracy: Governments want to tighten control over tariff rates, duties, and economic statistics.
- Trade enforcement: From precious metals to musical instruments, if the right code isn’t on the box, customs will block it.
This shift means even small businesses and Etsy sellers must learn the difference between a “scarf” and “silk scarf” in the eyes of the harmonized system.
How to Classify Products Without Losing Your Mind
Here’s the brutal truth: figuring out the particular product classification isn’t straightforward. For example:
- A wooden chair: one code.
- A plastic chair: a totally different code.
- A musical instrument case: not the same as the instrument itself.
The general rules of interpretation guide classification, but they’re dense. Many merchants rely on customs brokers or US International Trade Commission lookup tools. The Census Bureau’s Schedule B search is another option, but it requires patience.
What Happens if You Get It Wrong
Misclassifying products is expensive. You risk:
- Delayed shipments stuck in customs limbo.
- Fines and back duties when audits uncover mistakes.
- Angry customers when orders don’t arrive.
In a world of instant shipping, one wrong tariff code can tank a brand’s reputation overnight.
The Big Picture: Tariffs as Trade Weapons
This isn’t just about compliance. It’s about global trade politics. Tariffs have become the new sanctions, and the U.S. government wants airtight data to enforce them. When the next round of temporary legislation or retaliatory duties hits, officials will lean on the harmonized tariff schedule to target industries. That means your shipment classification isn’t just paperwork, it’s part of trade policy itself.
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See the 21x DifferencePreparing Now: Practical Steps for Businesses
If you export anything, start now:
- Identify codes: Use the Census Bureau or a customs broker to nail down the correct HS code.
- Update systems: Make sure your ecommerce platform or shipping software captures the digits long field USPS will require.
- Train your team: Teach staff how to spot when a new product needs a new code.
- Audit your catalog: Don’t wait until September 2025, clean up your classifications today.
Businesses that get ahead will breeze through customs. Those that don’t will face a pile of returned shipments, taxes, and unhappy buyers.
Frequently Asked Questions
What is the harmonized tariff code?
It’s a global classification system run by the World Customs Organization that standardizes product categories for international trade. The first six digits are universal, but each country adds its own rules.
What’s the difference between HTS codes and Schedule B numbers?
Both come from the same HS system. HTS codes apply to imports, while Schedule B codes apply to U.S. exports and are overseen by the Census Bureau.
How long are HTS codes and Schedule B numbers?
Typically ten digits long in the U.S. The first two digits identify the broad product group, with more digits narrowing down to the particular product.
Do I need a tariff code for every product I export?
Yes. Every traded product must be linked to the right code. Even small differences in material or design may change classification.
What happens if I ship without the correct HTS code?
Your shipment can be delayed, rejected, or fined. Customs agencies use these codes to determine tariff rates, duties, and taxes. USPS will no longer accept vague descriptions without a tariff code starting September 2025.
Written By:
Jeremy Stewart
Jeremy Stewart leads customer success at Cahoot, helping merchants achieve high-performance logistics through smart technology and process optimization. With a background in both ecommerce operations and client services, Jeremy ensures that every merchant using Cahoot gets measurable results—whether they’re scaling from one warehouse to many or managing complex returns.
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AI Tools for Ecommerce: Choosing the Right Tech to Stay Competitive
In this article
6 minutes
- Why AI in Ecommerce Is No Longer Optional
- The Power of Data in Ecommerce
- Key Areas Where AI Tools Drive Impact
- Evaluating the Right AI Tools for Ecommerce
- Adoption Challenges: Data Quality and Trust
- The Future: Generative AI in Ecommerce
- Why Adoption Matters More Than Experimentation
- Conclusion
- Frequently Asked Questions
Why AI in Ecommerce Is No Longer Optional
AI has become the hidden engine driving the ecommerce industry. From automated inventory management to personalized recommendations, AI tools for ecommerce are reshaping how online businesses operate. Walmart, Amazon, and Shopify have already made AI a core part of their strategies, which means independent ecommerce businesses need to adopt the right AI technology, or risk falling behind.
AI tools are no longer a futuristic add-on; they are essential for analyzing customer data, predicting demand, improving customer satisfaction, and staying competitive in a market dominated by giants. Sellers who fail to implement AI-powered solutions will find themselves reacting to market trends rather than shaping them.
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I'm Interested in Saving Time and MoneyThe Power of Data in Ecommerce
Ecommerce runs on customer data: purchase history, browsing behavior, customer interactions, and even customer feedback. AI tools allow retailers to analyze this data at scale, transforming raw information into valuable insights. These insights power predictive analytics and personalized recommendations that drive customer engagement and loyalty.
For example, using natural language processing, an AI system can analyze customer reviews and social media posts to identify product issues before they spiral into bad ratings. Competitor pricing can also be tracked in real time, helping retailers adjust pricing strategies dynamically.
Key Areas Where AI Tools Drive Impact
Inventory Management
Poor inventory management leads to either excess costs or missed sales. AI-powered inventory management tools use historical sales data and market trends to forecast demand, ensuring retailers avoid both overstocking and stockouts. These systems adapt to consumer demand patterns and can even factor in seasonality and marketing campaigns.
Marketing Strategies
AI marketing tools automate content creation, generate SEO optimized product descriptions, and evaluate messaging performance. For ecommerce businesses competing with retailers that have entire AI-driven marketing departments, tools that improve campaign targeting and analyze customer behavior are essential.
AI also powers personalized marketing. By analyzing transaction patterns and purchase history, businesses can create tailored email marketing campaigns, targeted promotions, and personalized shopping experiences that boost conversion rates.
Customer Experience
Customer experience is now a key differentiator. AI-powered chatbots and virtual assistants deliver real-time customer service, reducing reliance on human customer service agents while still providing seamless support. Personalized shopping experiences powered by AI keep customers engaged and increase satisfaction.
For instance, AI tools can analyze customer preferences and browsing behavior to make real-time product recommendations. Retail websites that fail to offer this level of personalization risk losing customers to competitors who can.
Supply Chain Optimization
Supply chain analytics powered by AI improves operational efficiency across the retail value chain. From supply chain management to store operations, AI tools help forecast demand, optimize logistics, and lower costs. For ecommerce platforms managing complex supply chains, these solutions ensure better supply chain management and keep customers happy with faster, more reliable deliveries.
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Get My Free 3PL RFPEvaluating the Right AI Tools for Ecommerce
Not every tool labeled “AI” provides value. Ecommerce businesses must evaluate AI tools carefully. Factors to consider:
- Seamless integration with existing ecommerce platforms
- User-friendly interface for non-technical teams
- Detailed analytics to drive data-driven decisions
- Proven track record with leading retailers
- Ability to ensure data quality and protect customer data
Retailers should test AI algorithms against real customer behavior data before fully implementing them. Evaluating AI tools also means comparing ROI across customer retention, sales growth, and operational efficiency.
Adoption Challenges: Data Quality and Trust
AI adoption isn’t without friction. The data retailers rely on often comes from multiple sources, sales data, purchase patterns, social media platforms, and customer feedback. Ensuring data quality is critical. If the data is incomplete or biased, predictive analytics and machine learning algorithms won’t provide accurate insights.
Customer trust is another challenge. Consumers want personalized shopping experiences, but they don’t want to feel surveilled. Retail businesses must balance the use of customer insights with transparent policies around data usage.
The Future: Generative AI in Ecommerce
Generative AI is emerging as the next wave. Gen AI solutions are now capable of writing product descriptions, generating marketing messages, and even designing personalized promotions. Ecommerce platforms that leverage generative AI in content creation and marketing campaigns will have an advantage in producing large volumes of high-quality, SEO optimized content quickly.
Retail companies that adopt these tools now will be positioned to remain competitive as generative AI reshapes the ecommerce industry.
Why Adoption Matters More Than Experimentation
AI tools are only valuable if they’re implemented strategically. Too many ecommerce businesses experiment with pilots but fail to integrate AI deeply into their operations. Leading retailers like Amazon and Walmart aren’t just using AI for marketing, they’re embedding AI across store operations, supply chains, and customer engagement.
Independent ecommerce sellers need to follow suit. Using AI-powered tools for ecommerce isn’t about chasing hype; it’s about survival in a marketplace where data-driven decision making, predictive analytics, and customer-centric strategies are now table stakes.
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The ecommerce sector is being redefined by artificial intelligence. Sellers who embrace AI technologies, from predictive analytics and automated inventory management to AI-powered marketing and generative AI, will stay ahead of consumer demand and competitor pricing pressures. Those who hesitate risk irrelevance.
Adopting the right AI tools for ecommerce allows retailers to gain valuable insights, improve customer satisfaction, and remain competitive against giants like Walmart, Amazon, and Shopify. In the future retail landscape, AI won’t just optimize ecommerce operations, it will decide who survives.
Frequently Asked Questions
What are the best AI tools for ecommerce businesses?
The best AI tools for ecommerce include AI-powered chatbots, predictive analytics platforms, AI marketing tools, and automated inventory management solutions. These tools improve customer satisfaction, boost sales, and optimize retail operations.
How can AI improve customer satisfaction in ecommerce?
AI improves customer satisfaction by analyzing customer interactions, purchase history, and browsing behavior to deliver personalized shopping experiences, real-time customer service, and targeted promotions that meet customer preferences.
How does AI impact inventory management in ecommerce?
AI-powered inventory management tools analyze historical sales data and forecast future customer demand. This ensures ecommerce businesses avoid stockouts, reduce excess inventory, and adapt quickly to market trends.
What role does generative AI play in ecommerce marketing?
Generative AI helps ecommerce companies create product descriptions, social media posts, email marketing campaigns, and other marketing materials at scale. These tools allow retailers to optimize marketing strategies and remain competitive.
Why should ecommerce businesses adopt AI tools now?
Adopting AI tools now ensures ecommerce businesses remain competitive as the retail industry embraces artificial intelligence. Early adoption allows retailers to gain valuable insights, improve customer retention, and build sustainable growth strategies before competitors dominate.
Written By:
Jeremy Stewart
Jeremy Stewart leads customer success at Cahoot, helping merchants achieve high-performance logistics through smart technology and process optimization. With a background in both ecommerce operations and client services, Jeremy ensures that every merchant using Cahoot gets measurable results—whether they’re scaling from one warehouse to many or managing complex returns.
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AI in Retail Operations: Reshaping the Future of Retail
In this article
17 minutes
- Introduction: The Retail AI Paradox
- AI is Everywhere in Retail Operations (and That’s a Good Thing)
- The Coming Disruption: AI-Powered Shopping Agents and Changing Consumer Behavior
- Bridging the Gap: What Retailers Should Do Now
- Summary: Embrace the Paradox for Retail Success
- Frequently Asked Questions
Introduction: The Retail AI Paradox
In the retail world, we’re facing a bit of an AI paradox. On one hand, AI in retail operations is a powerhouse for efficiency; it can optimize everything from inventory management to dynamic pricing, making businesses run leaner and smarter. On the other hand, the rise of AI-driven shopping (think intelligent agents making purchases for consumers) threatens to disrupt traditional retail models in ways we’re only beginning to grasp. I’ve been watching this space closely, and the signal is clear: retailers must embrace AI to streamline and survive today, even as they brace for the bigger shifts AI could cause in customer behavior tomorrow.
As one industry observer from AWS (Amazon Web Services) hinted, retailers should “optimize for efficiency, prepare for disruption.” That phrase sums it up nicely. You want to use AI tools to sharpen your operations and improve customer satisfaction, but you also need to keep an eye on how AI technologies are changing shopper expectations and competitive dynamics (the disruption part). Let’s unpack this paradox and explore both sides, the here-and-now benefits of AI and the looming changes on the horizon.
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I'm Interested in Saving Time and MoneyAI is Everywhere in Retail Operations (and That’s a Good Thing)
First, the obvious part: artificial intelligence is increasingly embedded in nearly every facet of retail operations. We’re well past the days of AI being a novelty or confined to a pilot project. Today, if you’re not leveraging AI in some form, you’re already behind. Here are some key areas where AI is improving efficiency and decision-making in retail:
- Demand Forecasting: Gone are the times of forecasting based only on last year’s sales and a spreadsheet. Modern AI systems ingest historical sales data, real-time trends, market trends, even weather and social media cues to predict demand with remarkable accuracy. This means retailers can anticipate how much of each product to have and where, reducing stockouts and overstocks. A 2025 study by OpenText noted that AI-driven forecasts are “far more accurate than traditional methods”, integrating diverse data points to predict demand with unprecedented precision. Fewer stockouts means happier customers and fewer lost sales; less overstock means lower holding costs and markdowns. It’s directly boosting the bottom line.
- Automated Inventory Management: Inventory management itself has been supercharged by AI. Machine learning models can determine optimal reorder points for each SKU, triggering restocks automatically. They factor in lead times, current velocity, and even competitor pricing changes. Some large retailers have AI that reallocates inventory across stores. If one location’s stock of an item is moving slowly but another can’t keep it on shelves, an AI might prompt a transfer to balance it out. Computer vision is also used in warehouses to monitor inventory levels (smart cameras that “see” when shelf stock is low) and even in stores (Amazon’s Just Walk Out tech, for example, automatically tracks when items are taken so inventory is updated in real-time). All this reduces labor and errors. It’s not sexy to customers, but operationally it’s a big efficiency gain.
- Dynamic Pricing and Markdown Optimization: AI allows truly dynamic pricing strategies that would be impossible to do manually. By analyzing sales patterns, inventory aging, and competitor prices, AI can adjust prices in real time to maximize revenue. For instance, if data shows a certain apparel item isn’t selling as fast as predicted, an AI system might initiate a slight price drop or a promotion to boost demand, rather than waiting for an end-of-season clearance. Alternatively, for high-demand products, AI might inch prices up (within allowed limits) to capitalize on willingness to pay. These pricing strategies are increasingly common in ecommerce but are also hitting brick-and-mortar via electronic shelf labels and apps. The result is higher operational efficiency, you sell products closer to the ideal price point, improving margins without manual intervention on each pricing decision.
- Supply Chain Optimization: Retail supply chains are getting smarter through AI analytics. Everything from predicting delays (using AI to analyze weather, political climate, etc.) to optimizing supply chain management (choosing the best shipping routes and methods) can be AI-driven. For example, AI can analyze past shipping data and real-time freight rates to suggest the most cost-effective way to move goods (should I ship by rail or truck for this distribution lane this week?). Supply chain analytics provided by AI also help retailers respond faster, if there’s a hint of disruption (like a factory issue or port delay), AI systems flag it early by detecting anomalies, giving retailers a head start to reroute or adjust orders. This improves resilience and reduces costly last-minute expediting.
- Workforce and Task Optimization: Beyond merchandise, retailers use AI to improve store operations and workforce management. AI can forecast foot traffic by time of day, helping set optimal employee schedules (so you’re not overstaffed during lulls or understaffed during rushes). It can also prioritize tasks, for instance, if an AI sees that online orders for curbside pickup are spiking on Monday mornings, it might prompt managers to assign more staff to picking and packing at those times. Some stores even use AI-driven robots to scan aisles for out-of-stock items or misplaced products, freeing up human staff for customer service tasks.
All these examples point to one thing: operational efficiency. Retail is a low-margin game, and AI is helping shave off costs and improve throughput in countless small ways that add up. According to the National Retail Federation (NRF), leading retailers leveraging AI have significantly improved metrics like inventory turnover and markdown rates, translating into percentage points of margin improvement. In fact, top retailers (the Walmarts and Targets of the world) are achieving notable cost reductions; one stat I came across said the top 5% of retailers have 31% lower fulfillment costs through integrated automation and AI, compared to the average. That’s huge in an industry where a 1% margin improvement is celebrated.
From a customer perspective, they might not see these AI tools, but they feel the effects: products are in stock more often, they get what they want when they want it, and even pricing can feel more “right” (no massive end-of-season gluts or mysterious price jumps). Customer satisfaction benefits from these back-end optimizations.
Case in point: Look at how a company like Stitch Fix (an online apparel retailer) used AI. They combined AI algorithms with human stylists to improve customer insights and inventory alignment. The AI would analyze customer profile data (size, style preferences) and purchase patterns to suggest what inventory to buy and how to personalize outfits for each customer. The result was less excess inventory and a more personalized, satisfying experience for the shopper, i.e., operational efficiency meeting customer experience improvement. This dual win is why AI’s ROI in retail has been compelling.
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Get My Free 3PL RFPThe Coming Disruption: AI-Powered Shopping Agents and Changing Consumer Behavior
So, everything above is great; AI is making the retail value chain run smoother. Now comes the potentially disruptive part: how AI might fundamentally change how consumers shop and what they expect. This is the side that could catch a lot of retailers off guard if they’re only thinking about internal efficiencies.
The concept of AI shopping agents or AI assistants handling shopping tasks for consumers is gaining traction (sometimes called “agentic commerce”). We touched on this in other discussions: digital assistants that can search products, compare, and even purchase on behalf of someone. This isn’t widespread yet, but the pieces are falling into place quickly. For example:
- Personal AI Shoppers: Imagine a busy professional who doesn’t want to manually shop for groceries or even clothes. They might use an AI assistant (maybe through a voice device or chat app) to handle it. “Buy me a week’s worth of keto-friendly groceries” or “I need a black cocktail dress for under $150 by next Friday.” The AI will parse this and engage with retailer systems to find the best fits and execute the orders. This moves the decision process from the person browsing websites to an AI scouring data. If you’re a retailer, suddenly your customer is a bot with a checklist, not a human swayed by branding or emotional advertising.
- Close-Up Algorithmic Comparison: These AI agents will compare products in an ultra-rational way. They’ll look at specs, features, price, reviews, warranties, materials, all the quantifiable attributes. Flashy marketing copy like “best ever” won’t register unless it’s backed by data. As a retailer or brand, this means you’d better have your factual ducks in a row. Products need rich attribute data and genuine differentiators. If not, the AI might just choose based on the lowest price or the highest average rating. Think about how Google’s search evolved websites to focus on SEO keywords and structured data; similarly, AI shoppers could birth a whole new concept of AEO (AI Engine Optimization), where brands structure product data to be friendly to AI algorithms.
- Changes in Loyalty and Discovery: Today, many shoppers have favorite stores or go-to brands. They might trust Nike for sneakers or always check Target for home goods. But an AI agent might be brand-agnostic; it will just find the product that fits the criteria best. This could erode traditional brand loyalty and retailer loyalty. If Alexa or Siri is placing the order, you might not even know which retailer it used if you don’t specify. The customer experience becomes abstracted away from the retailer’s own interface. This is disruptive because retailers invest heavily in their apps, sites, and branding to create a certain experience. If transactions increasingly happen through third-party AI intermediaries, retailers will have to find new ways to differentiate (perhaps through unique products or ensuring their data makes their items more likely to be recommended by AIs).
- Direct-to-AI Marketing: We might see retailers or brands trying to “market” to algorithms. For example, ensuring their products are the ones that AI agents “like” to choose. How do you do that? High ratings, consistent stock, competitive pricing, complete and accurate product info. Possibly even integrating with the AI platforms via APIs, so your products are prioritized. It’s a whole new kind of B2B2C dance. In fact, it’s already starting: some brands are providing detailed product feeds to smart assistants and working on partnerships (we saw Shopify partnering with OpenAI and others, so Shopify merchants’ products appear in AI search results).
- Reduced Impulse Buys / Changed Store Formats: If AI agents handle routine purchases, physical stores might shift more toward experiential shopping or immediate need fulfillment. Fewer people might roam aisles for weekly shopping if their AI does it. But they might still go to stores for experiences or immediate gratification. Retailers may need to rethink store layouts, perhaps focusing on showcasing products (for people or for the AI’s “eyes” like scanning QR codes) and offering easy pickup for AI-placed orders. The retail industry could split into two: a highly automated replenishment business vs. experiential retail for discretionary buying.
I find this disruption aspect both exciting and daunting. It reminds me of when ecommerce itself emerged. Initially, it was a small efficiency play (buy from home, ship to door), but it massively changed consumer behavior over time. Now we take online shopping for granted. AI-driven shopping might be a similar wave: small now (maybe a few early adopters letting an AI pick their grocery list), but potentially huge in a decade.
AWS folks (and others in the cloud/AI space) are already talking about this shift. Amazon’s CEO, Andy Jassy, recently predicted that generative AI and agentic AI will change how customers shop and even how Amazon’s own workforce is structured. When the CEO of the world’s biggest online retailer says that, you pay attention. Walmart also isn’t sitting idle; they’ve announced their own AI “super agents” for customers (like a personalized shopping assistant called “Sparky” in their app). They’re essentially trying to build their own AI interface with shoppers to not lose that connection. Walmart’s CTO said they envision these AI agents as “the primary way people engage with Walmart” in the future. That’s a radical statement: it implies that instead of browsing the Walmart app, you might just chat with “Walmart AI” to get what you need.
Bridging the Gap: What Retailers Should Do Now
We have efficiency today and disruption tomorrow, so how do retailers handle both? In my view, it’s not an either/or. You should do both concurrently: double down on AI for operational excellence (because that pays off immediately and gives you the bandwidth to strategize) and start positioning your business for the coming changes in shopper behavior.
Tactically, on the efficiency side: If you haven’t already, invest in AI tools or platforms for the core areas: predictive analytics for demand and inventory, AI-driven personalization engines for ecommerce (making use of all that valuable customer data you have to improve engagement), and even NLP (natural language processing) for things like analyzing customer feedback at scale. Many retailers have data but struggle to use it; AI thrives on data. For example, use NLP to read through thousands of customer reviews or service transcripts to spot pain points or emerging trends (maybe customers are all asking if a product is sustainable, that insight could drive your merchandising).
Also, consider pilot programs with more frontier tech: maybe an AI vision system in your store to optimize product placements or a generative AI tool to create product descriptions and social media content (speeding up content creation in your marketing campaigns). These improve current operations and also get your team comfortable working alongside AI.
On the disruption preparation side: Begin enriching your product data now. If you’re a retailer, ensure every product in your catalog has a thorough, structured dataset (attributes like dimensions, materials, features, etc.). Standardize it in formats that can be easily consumed by AI assistants. Many industry groups are working on data standards for AI consumption; keep an eye on those and adopt them. The term “AI-ready product data” is something I predict we’ll hear a lot. It’s akin to how sites had to implement schema markup for SEO to be “Google-ready.”
Next, think about alliances or integrations with AI platforms. If, say, Alexa, Google Assistant, or some popular shopping app’s AI gets big, how will your products be surfaced? For example, some brands are now creating ChatGPT plugins or integrating with the likes of Instacart’s Ask AI feature, so that when a user asks “I need ingredients for tacos,” their brand products are recommended. Those kinds of partnerships could become the new SEO/ads, basically paid placement for AI recommendations, or at least organic optimization for them.
And don’t forget the human element. Even as AI grows, brands should emphasize what makes them humanly unique: brand story, community, and in-person experiences. Those intangible factors will still matter to consumers on some level and can influence what they tell their AI agents to value. For example, a consumer might instruct their AI, “I prefer sustainable products” or “support local businesses when possible.” If your brand identity includes those values (and you communicate them), you might be the choice an AI makes when those conditions are set.
Culture and talent: Internally, prepare your team for this future. Upskill your employees in data analytics and AI literacy. Encourage a culture that’s not afraid of testing new tech. Many retailers historically have been tech-laggards, which won’t fly in this coming environment. The ones who treat AI as an opportunity (not just internally, but as part of the customer offering) will adapt fastest. We may even see new roles like “AI shopper experience manager” or “algorithmic merchandising strategist” in retail org charts.
One example to emulate is how Target has been investing in its data science and tech teams. They use AI heavily for supply chain and pricing, but they’re also experimenting with chatbots for customer service and visual search (taking a photo of an item and finding similar products). They’re essentially weaving AI into both back-end and front-end. That’s the blueprint: holistic integration.
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Explore Fulfillment NetworkSummary: Embrace the Paradox for Retail Success
The AI retail paradox, optimizing for efficiency while preparing for disruption, isn’t something to solve, but rather a dual mandate to embrace. Retailers who harness AI to streamline operations will enjoy immediate gains: lower costs, better customer experiences through personalization, and data-driven decision-making that outpaces gut instinct. These improvements are becoming the price of entry to stay competitive (as a recent Chain Store Age article put it, AI has moved from “experiment to expected” in retail). At the same time, those same retailers must keep their gaze on the horizon. The very AI tools making life easier inside the business are empowering entirely new consumer behaviors outside it.
It reminds me of a chess game where you have to think a few moves ahead. You make your current move (deploying AI for efficiency) while anticipating your opponent’s response (how AI will alter the market landscape). The retail industry players that will “win” in the coming years are likely those treating AI as both an operational tool and a strategic disruptor. They’ll squeeze every drop of ROI from AI in the present (from predictive analytics and automation) and invest in the capabilities to serve AI-driven shoppers of the future (through data quality, integration, and maybe even their own consumer-facing AI features).
We stand at a point where AI technologies can boost our profit margins and potentially erode certain revenues (like if an AI always finds a cheaper competitor product). It’s a bit of a tightrope walk. But retailers have walked similar tightropes before: ecommerce, mobile commerce, and omni-channel integration; each time, the key was to adapt rather than resist. AI is just the next evolution.
Ultimately, the retailers that lean into this paradox, leveraging AI for all its worth internally, while radically open-minded about reimagining their customer approach, will not just remain competitive; they’ll set the pace. Efficiency and disruption don’t have to be opposites; used wisely, they can be complementary. Efficient operations free up resources to experiment with new models; disrupted markets reward the most efficient and innovative players.
In my own work with retail clients, I often say: use AI to run better, and be ready for AI to change the game. Do both with equal zeal. Those who do will find that when the dust settles on this next wave of retail transformation, they’ll be ahead of the pack, having turned a paradox into a strategy.
Frequently Asked Questions
What is the AI paradox in retail?
The AI paradox refers to the tension between AI’s promise of efficiency and the disruption it causes by reshaping customer expectations and competitive dynamics.
Why is retail adoption of AI more important than efficiency?
Efficiency gains help retailers cut costs, but without adoption, they risk being overtaken by competitors using AI to reinvent entire customer journeys.
What are the risks of delaying retail AI adoption?
Retailers that delay adoption risk falling behind as competitors capture market share with AI-driven personalization, predictive logistics, and seamless shopping experiences.
How can retailers start adopting AI effectively?
Retailers can begin by investing in AI literacy, modernizing data infrastructure, piloting customer-facing use cases, and aligning with partners who understand retail’s unique challenges.
What role does culture play in AI adoption?
Culture is critical. Organizations that encourage experimentation and accept fast iteration adapt more quickly, while rigid, risk-averse cultures struggle to integrate AI meaningfully.
Written By:
Jeremy Stewart
Jeremy Stewart leads customer success at Cahoot, helping merchants achieve high-performance logistics through smart technology and process optimization. With a background in both ecommerce operations and client services, Jeremy ensures that every merchant using Cahoot gets measurable results—whether they’re scaling from one warehouse to many or managing complex returns.
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AI Shopping Assistant Revolution: Shopify’s Big Bet on Agentic Commerce
In this article
11 minutes
Why AI Shopping Agents Are Suddenly Everywhere
Just a couple of years ago, “AI shopping assistant” sounded like a gimmick. Today, it’s feeling like the future of online shopping. Shopify’s latest earnings blew past expectations (31% revenue growth year-over-year), and the company’s leadership credited much of that success to investments in AI-powered shopping. In Shopify’s Q2 2025 call, president Harley Finkelstein talked up “agentic commerce” as the next big thing, saying Shopify’s unique position with brands gives it an edge in this emerging online retail industry. In plain English: AI shopping assistants and AI agents are moving from tech demo to core business driver. And the results are already showing up in Shopify’s bottom line.
From my perspective, this isn’t just Shopify hyping new tools; it’s a sign of a broader shift in how shoppers and retailers interact. AI agents (essentially smart algorithms often powered by large language models like GPT-5) can now handle tasks that used to require a human. They can track price drops, compare features across dozens of products, answer detailed questions about specs or reviews, and even complete purchases on behalf of a user. All automatically. We’re witnessing the rise of the agentic AI era, where consumers might simply tell their phone or smart assistant, “Find me the best budget 4K TV and buy it,” and an AI agent does the rest. That might have sounded sci-fi, but Shopify’s saying it’s just about here.
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I'm Interested in Saving Time and MoneyShopify’s AI Playbook: Building the Agentic Commerce Infrastructure
Shopify isn’t sitting around. They’re actively opening the door for these AI shopping agents to drive sales on their platform. In fact, Shopify just rolled out a comprehensive suite of tools enabling AI agents to execute complete shopping transactions. Let’s break that down:
- Shopify Catalog – A giant database that lets AI agents instantly search hundreds of millions of products with real-time inventory and pricing. Basically, an AI assistant can see what’s in stock across Shopify’s network and at what price, so it knows where to find the best deal or quickest ship time for you.
- Universal Cart – This one blew my mind a bit. It lets an AI agent hold items from multiple different stores in one cart. Imagine you’re chatting with a generative AI shopping bot that recommends a shirt from one Shopify store and sneakers from another. Normally, you’d have to check out twice. But with Universal Cart, the AI can lump them together and handle all the complexity in the background. One shopping journey, one checkout, even though the products are from different businesses.
- Checkout Kit – The final piece: when it’s time to buy, the AI agent can seamlessly initiate the purchase through each store’s checkout flow, while keeping the experience within the assistant interface. In practice, that means the end customer doesn’t feel like they left the chat or app to go fill out forms on a website. The AI handles it, maintaining the assistant’s “branding” or interface. Smooth.
Shopify basically built the plumbing so that any AI, whether it’s Shopify’s own assistant, or a third-party AI agent like something running on Google’s Gemini or OpenAI, can plug into Shopify stores and transact. It’s a bold move to position Shopify as the behind-the-scenes infrastructure for AI-driven shopping. Harley Finkelstein even said Shopify’s ahead because of their relationships with AI companies (they’ve partnered with OpenAI and others). The message: if brands want their products found and purchased by the coming wave of AI assistants, they need to be on platforms (like Shopify) that are ready for it.
And it’s not just Shopify. Amazon and Walmart are experimenting with their own AI shopping solutions. (Amazon recently piloted a “Buy for Me” feature where their app’s AI will literally purchase items from other websites for you, wild.) The future of e-commerce might not be customers browsing websites at all; it could be AI agents doing the browsing based on our preferences and instructions. Consumers might simply say what they want, and AIs will do the searching, vetting, and buying.
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If you’re wondering why anyone would use an AI agent instead of going to a store website or app themselves, here’s the appeal: efficiency and personalization. A good AI shopping assistant can instantly filter through thousands of options across the web, taking into account your specific preferences, past purchases, and even pulling in reviews or expert data. It’s like having a personal shopper who knows everything about every product ever made, available 24/7. Busy buyers love anything that saves time and makes life easier. If an AI can find the exact product that fits my needs (cheapest price, highest rated, arriving tomorrow), why would I slog through multiple websites and read endless reviews myself?
These agents can also answer questions in real time, “Does this laptop support 32GB RAM? What’s the return policy? Is there a warranty?”, without me having to dig through FAQ pages. They can compare and find products that meet very specific criteria (e.g., “find me a dining table under $500 that’s solid wood and has at least 4-star reviews”). That’s a level of service traditional search or e-commerce interfaces haven’t delivered. Generative AI and LLMs are making the experience more conversational and human-like. It feels less like using a search engine and more like chatting with a super knowledgeable sales associate.
However, this shift has huge implications for brands and online retailers. If customers start delegating their purchase decisions to AI agents, the online shopping experience changes fundamentally. Product recommendations might be coming from an algorithm that doesn’t care about flashy marketing; it cares about data and facts. That’s a bit of an AI retail paradox: on one hand, AI-driven personalization can boost customer satisfaction by surfacing exactly what people want; on the other hand, it could disrupt the traditional notions of brand loyalty and impulse buying. Consumers might rely on cold, hard facts from an AI (specs, price, reviews) more than brand image or emotional ads. As an industry colleague of mine noted, things like emotional ad copy and lifestyle photos may lose punch, while verifiable data on materials and performance become more critical. In a world of AI agents, your product descriptions, specs, and reviews (essentially, your data) matter more than shiny marketing.
Another consideration: secure shopping experiences. AI agents will need access to a lot of information to do their jobs, including product feeds, inventory levels, and maybe even your past purchase history (if you allow it). Platforms like Shopify are focusing on ensuring these integrations are secure and privacy-compliant. Trust is key: both retailers and shoppers need to trust the AI systems. Shopify has even tweaked its code to manage how third-party AI scrapers or bots interact with stores, likely to prevent abuse while still enabling genuine assistants. It’s a delicate balance of opening up for new opportunities (AI-driven sales) without losing control of the customer relationship.
What It Means for Retailers and Brands
So, what should business owners and brand operators take away from this? I see a few immediate action items:
1. Optimize Your Product Data for Machines: In the same way we all learned about SEO (Search Engine Optimization) to rank on Google, now we have to think about “AEO” – AI Engine Optimization. AI shopping agents don’t “see” your pretty web design; they consume your data. Are your product titles, descriptions, specs, pricing, and stock info easily readable by a machine? Are they comprehensive and accurate? If your listings aren’t structured for machine readability, you’ll be invisible to these assistants. This might mean adopting structured data standards, improving your product information management, and syncing inventory in real-time. Brands should audit their catalogs and ensure everything from size dimensions to materials to customer ratings are correctly exposed. An AI can’t appreciate your lifestyle imagery – it’s parsing text and numbers. Make those count.
2. Embrace AI Tools Yourself: Just as consumers will use AI, brands can leverage AI-powered tools on their end. For example, AI can help write better product descriptions (tailored to what consumers ask about), manage customer service chats via chatbots, and analyze customer behavior patterns to see what factors influence purchase decisions. Many ecommerce businesses are already using AI for things like dynamic pricing, personalized email marketing, and inventory forecasting. These improve the shopping journey for customers (through more relevant recommendations, etc.) and improve operations for you (through efficient stock management and pricing). If your competitors are using AI to create a smoother shopping online experience and you’re not, you’ll fall behind.
3. Prepare for New Customer Journeys: The purchase decisions of the near future might not involve a customer slowly meandering through a site and adding things to the cart. It could be an AI agent presenting 2 options to the customer for instant approval. Or an AI just orders refills of a product for a subscriber without them even asking (based on preset preferences). Retailers need to anticipate these flows. That could mean focusing more on subscription models, direct integrations with assistant platforms, or ensuring your brand is recommended by the algorithms (possibly via great reviews, or partnerships, or by having unique products an AI can’t find elsewhere). It’s a new kind of marketing: instead of appealing solely to consumers, you’re also appealing to the logic of AI systems. For instance, if sustainability or warranty length becomes a key attribute that AIs consider (because consumers expect those factors), brands might highlight those more. I’m curious which product attributes will matter most to the “AI shoppers”; it could be sustainability, warranty, reviews, origin, etc., as speculated by industry observers.
4. Don’t Ditch the Human Touch: Even as technology takes over routine interactions, there’s still a role for human-centric branding and community. AI assistants might handle transactions, but brand discovery can still happen through content, social media, and real-world experiences. Smart retailers will use AI for what it’s good at (speed, data-crunching, automation) while continuing to invest in brand storytelling and customer relationships. The end customer ultimately benefits from AI efficiency, but they’ll still connect with brands that stand for something relatable. In short, let AI handle the tedious stuff so you can focus on higher-level value and creativity.
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Explore Fulfillment NetworkConclusion: Adapting to an AI-Driven Commerce Era
The rise of AI shopping assistants is not a far-off fantasy; it’s here, and it’s accelerating. Shopify’s big bet on agentic commerce is a wake-up call across the commerce space. They’re effectively saying: the way people shop online is evolving, and Shopify intends to be the backbone powering those AI-mediated experiences. For consumers, this promises more personalized, efficient shopping journeys where an AI does the heavy lifting of finding deals and making sense of endless options. For retailers and brands, it means now is the time to ensure your data and systems are ready for algorithmic scrutiny. Embrace the change rather than fear it. Much like the early days of ecommerce itself, there will be winners and losers in this transition. The winners will be those who see AI not as a threat but as a tool, one that can create new opportunities for engagement and growth.
From secure shopping experiences and streamlined checkouts to AI-driven product recommendations, the pieces are falling into place for a new era of ecommerce. I won’t pretend there aren’t challenges (privacy, maintaining customer loyalty, and the sheer unpredictability of letting robots do the shopping). But one thing’s clear: online retail is headed into an AI-driven future, and it’s better to expect and prepare for it than play catch-up later. As Shopify’s leadership hinted, the brands whose products are “front and center” in AI workflows will have a huge advantage. It’s time to focus on that future now. The checkout bots are coming, and they might already have your site in their cart.
Frequently Asked Questions
What is an AI shopping assistant?
An AI shopping assistant is software that helps shoppers find products, compare prices, and make purchase decisions using generative AI and large language models.
How do AI shopping agents work?
They pull product data, reviews, and prices from retailers, then use AI to filter, rank, and recommend the best options based on customer preferences.
Why is Shopify betting on AI agents?
Shopify believes agentic AI commerce will dominate online shopping and is building tools like Catalog and Universal Cart to connect brands with AI-driven purchase decisions.
How will AI shopping assistants change online shopping?
They’ll make shopping faster and more personalized, offering product recommendations, price tracking, and even automated checkout.
How should retailers prepare for AI-driven shopping?
Retailers should optimize product listings with structured data, maintain strong reviews, and embrace AI-friendly platforms to stay visible to shopping agents.
Written By:
Jeremy Stewart
Jeremy Stewart leads customer success at Cahoot, helping merchants achieve high-performance logistics through smart technology and process optimization. With a background in both ecommerce operations and client services, Jeremy ensures that every merchant using Cahoot gets measurable results—whether they’re scaling from one warehouse to many or managing complex returns.
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