Welcome to the run-up to the 2021 holiday season. Shipping rates are higher than before the pandemic, fulfillment-related labor is scarcer and more expensive, and supply chains are clogged and unpredictable.

2020 and 2021 transformed how retailers fulfill online orders. Consumers embraced omnichannel services—especially curbside pickup—during the COVID-19 pandemic. Meanwhile, to protect their margins, retailers have hiked free shipping thresholds—the amount customers must spend to qualify for free shipping—for orders that shoppers want delivered to their homes.

Some larger, deep-pocketed retailers like Amazon.com Inc. and Walmart Inc. have invested in warehouse automation and robotics to make fulfillment more efficient. But others are taking less capital-intensive approaches to make shipping and returns more cost-effective, including cutting down on merchandise returns, implementing higher free shipping thresholds and making sure packages are delivered to the right place on the first try.

Some good news for some retailers—but not for consumers—is that high online demand from consumers means retailers don’t need to rely as heavily on discounts and promotions compared with 2020. The result is higher margins, which help retailers offset increased fulfillment, shipping and labor costs.

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