It's not that everybody wants free shipping,it's that they expect it.
So how do you solve the free-shipping issue when a company like Amazon is willing to lose $12 billion a year on shipping, delivering goods for free through deficit spending.
Here are a few strategies:
Minimum Order Amount
Set a purchase threshold before free shipping kicks in, which involves careful analysis of cost-of-goods and profit. What is your typical per-order amount, and what is the profit on that? Setting a purchase threshold slightly higher than your typical order might cause customers to order more than usual in order to get the free shipping.
Targeted Free Shipping
Only offer free shipping on certain items (or certain categories), preferably ones that cost you the least to ship (smaller and lighter).
Charge for Expedited Shipping Only
Depending on how you structure your shipping, you can give away the slow option (Ground, SmartPost, USPS, etc.) but charge for expedited (two-day or overnight). This will at least limit the damage.
Build Shipping Costs Into the Product Price
This is the equivalent of charging $0.99 instead of $1.00, but it works. People love free shipping and will sometimes ignore companies that don't offer it. If you check out the prices for items that qualify for Amazon Prime vs. those that don't, you'll find there is often a jump in price for Amazon Prime orders. So Amazon isn't giving anything away, just creating the perception.
Offer a Subscription Program
If you have a product that requires regular replenishment, a subscription model can be a very cost-effective offer, allowing you to batch orders and send them all out at once. It is cheaper to assemble 250 orders on one day than 50 per day spread out over the work week. If you have enough volume, you might qualify for a remailer who offers lower shipping costs, and if not, the resulting labor efficiency will at least cancel out some of your shipping costs.
Perception is an important part of reality, and people always like to believe they are getting something for free, even if they got lured into making a bigger purchase than usual or paid for the shipping through a higher item price.