How to Make Free Shipping Profitable on Shopify

Free shipping pays for itself when the order it brings in earns more than the postage costs. The usual way there is a minimum order: set it a little above what shoppers already spend, so the extra items cover the shipping. This guide shows how to make free shipping profitable: the calculation, four ways to fund it, and how to set it up in Shopify.

Why does free shipping matter so much?

Because extra costs are the main reason shoppers walk away at checkout. In the Baymard Institute's survey of US online shoppers, leaving aside those who were just browsing, 40% of those who abandoned a checkout blamed extra costs such as shipping, tax and fees. Slow delivery came well behind, at 20%.

The cost does not disappear, though. Someone pays the carrier, the packaging and the time it takes to pack the order, and unless the order covers it, that cost comes out of your margin.

Four ways to make free shipping profitable

1. Calculate your free shipping threshold

Start here. A minimum set too high is one nobody reaches; set too low, it pays postage on orders you would have had anyway. Aim for the amount that asks for one more item.

Start a little above your average order value, close enough that one more small item gets the shopper there. Here is the sum for a store with a $40 average order, $8 average shipping cost and a 40% gross margin, testing a $55 threshold:

Extra order value: $15 (from $40 to $55)
Extra gross profit: $15 × 40% = $6
Shipping left to cover: $8 − $6 = $2 per order

At $55 the extra items cover $6 of the $8. To cover all of it, the threshold has to rise to $60, where the extra $20 earns $8, or you lower the shipping cost itself (strategy 4). Run the same sum with your own numbers, then check the threshold against your orders after a few weeks.

Then show the distance. "You are $6 away from free shipping" in the cart gives the shopper a clear next step, which "Free shipping over $50" in the header does not. In Discounty, on the Essential plan and above, a Shipping discount that applies without a code can show a progress bar that does this.

2. Adjust your pricing and product selection

You can add part of the shipping cost to your product prices, so "free" shipping is paid for in the price. Or offer free shipping only on items that are light or have a margin wide enough to absorb it.

3. Use it as a limited-time promotion

Free shipping does not have to run all year. Offered for a holiday or a weekend sale, with a clear end date, it gives shoppers a reason to order now.

Read More: Limited-time Offers

4. Lower your shipping costs

The cheaper the shipping, the less each order has to cover. As your volume grows you can negotiate rates with carriers such as UPS or DHL, use the discounted rates in Shopify Shipping, or work with a third-party logistics (3PL) provider that ships in bulk.

How do you get shoppers past the threshold?

A minimum purchase amount is a common way to offer free shipping. SKIMS, for example, states on its shipping page that domestic US orders of $75 or more ship free.

A second offer above the threshold gives shoppers who are already close a reason to go further.

Add a second offer above the threshold

Say free shipping starts at $75 and you also offer "15% off orders over $100". A shopper with $70 in the cart now has two targets: $5 more for free shipping, $30 more for the discount. Check the margin on that second tier first. 15% off a $100 order is $15, while the extra $30 earns $12 at a 40% margin, so at that margin the discount costs more than the extra items bring in. It pays only if your margin is higher or the tier is set further up.

In Discounty the second offer is a Cart goal campaign. One tier works on every plan; more than one tier needs the Essential plan or above.

Can bundles absorb the shipping cost?

A bundle puts several items in one parcel, so one shipping cost is spread across all of them.

For example, a skincare brand might package a cleanser, toner and moisturizer. A coffee brand could bundle a bag of beans with a branded mug and a small grinder. Price the bundle above your free shipping threshold, so one order covers the postage.

You can also let shoppers build their own bundle with a quantity discount, such as "buy any 2, get 10% off; buy any 3, get 20% off". In Discounty that is a Quantity discount campaign; more than one tier needs the Essential plan or above.

Should free shipping go to everyone?

Free shipping does not have to be for everyone. Two groups are worth it on their own:

Members of your loyalty program. Free shipping is a perk shoppers understand at once, and one more reason to order from you again.
First-time buyers. A one-time free shipping code for anyone who creates an account or joins your email list lowers the cost of trying you.

Which tools help you offer free shipping without losing money?

Two kinds of tool do the work:

Shipping and fulfillment: Shopify Shipping gives you discounted carrier rates, and 3PL providers such as ShipBob or Flexport store, pack and ship your orders.
Discount apps: these run the offers that raise the order value, such as tiered discounts and cart goals, so more orders cross the threshold.

How Discounty supports free shipping offers

Here is how Discounty covers the strategies above:

Cart goal: "spend $100, get 15% off" above your free shipping threshold.
Quantity discount: "buy more, save more" for shopper-built bundles.
Shipping discount: free or reduced shipping, automatic or with a code, on the paid plans.
Shipping progress bar: on the Essential plan and above, a Shipping discount that applies without a code can show a bar telling shoppers how far they are from free shipping. One campaign at a time can show it.
Scheduling: a start date and an end date, so a free shipping weekend ends on time.

How do you set up free shipping in Shopify?

Shopify gives you two ways in the admin:

A free shipping rate: in your shipping settings, a rate of $0 for orders over a set amount, such as $75. It applies to every qualifying order.
A free shipping discount: a code such as FREESHIP, or an automatic discount, for a campaign or a particular group of customers.

To add a second offer on top, pair Shopify's rate with a campaign in Discounty:

Step 1: Set your foundation in Shopify. Create your free shipping rule (e.g., free shipping over $75).
Step 2: Add a Cart goal campaign in Discounty for a higher amount, such as 15% off orders over $100.

Free shipping brings shoppers to $75; the cart goal gives the ones already there a reason to reach $100. To undo it, deactivate the Discounty campaign: it shows as Reverting until the discount is removed. Shopify's shipping rate is unaffected.

How do big brands fund free shipping?

Amazon: a paid membership

Amazon's Prime pages describe a paid membership that includes free shipping on Prime-eligible items. The fee helps pay for the shipping, and members have a reason to order from Amazon rather than somewhere else.

Nike: a free membership and a minimum

Nike's membership page offers members, who join for free, free shipping on orders of $50 or more. Joining costs nothing, and the $50 minimum keeps small orders from carrying free postage.

What a smaller store can take from them

Setting a realistic minimum threshold based on your own AOV and profit margins.
Rewarding your best customers with a loyalty program that offers free shipping as one of its main benefits.
Adding a second offer above the threshold so the shoppers who reach it have a reason to keep going.

Can free shipping be profitable in the long run?

Yes, if each free shipping order earns more than it costs to ship. Three steps get you there:

Do the sum: set the threshold from your average order value, shipping cost and margin.
Choose who gets it: everyone above a minimum, loyalty members, first-time buyers, or selected products.
Raise the order value: a cart goal or quantity discount above the threshold, and a progress bar that shows the distance (Essential plan and above in Discounty).

Questions

1. How can I offer free shipping without losing money?

You can make free shipping profitable by setting a minimum order threshold, adjusting product pricing, offering it only on high-margin items, or using tiered discounts to increase average order value.

2. How do I calculate the right free shipping threshold?

Start with your average order value, shipping cost, and profit margin. Set a threshold slightly above your current AOV so the extra profit from larger orders helps cover the shipping expense.

3. Does free shipping really increase sales?

It addresses the most common reason for leaving at checkout: in the Baymard Institute's survey, 40% of shoppers who abandoned a checkout blamed extra costs such as shipping, tax and fees. A threshold also gives shoppers a reason to add items.

4. What’s the best way to encourage customers to reach the free shipping minimum?

Use tiered discounts, product bundles and cart goals. A progress bar that shows how far the shopper is from free shipping helps too.

5. Should I offer free shipping to all customers or only to specific groups?

Either can work. A store-wide threshold reaches every shopper; free shipping kept for loyalty members or first-time buyers costs less and rewards the customers you most want back.