While it's not a top-of-mind thought for busy merchants, shipping is one of the biggest considerations for customers shopping online. "How much is shipping?" and "When will my order arrive?" are make-or-break questions that determine whether a buyer completes their purchase or not.
Today, customers expect free shipping and super fast delivery. A recent McKinsey report cites that more than 90% of US consumers expect two- to three-day delivery as the baseline, and 30% expect their orders delivered the same day. And according to a 2021 Consumer Trends Report, 80% of consumers expect free shipping when ordering a certain dollar amount of products, and 66% of consumers expect free shipping for all online orders. And if it’s not offered? They’re happy to walk away.
Shipping fees are frequently named as one of the main reasons why shoppers abandon their carts—with an average abandonment rate standing at 69.8%. With these numbers in mind, we’ve broken down the free shipping strategy for you: When and how to use it to increase your conversion and average order value. Read on!
When to offer free shipping
Nothing is ever free, including shipping. To offer free shipping on all products, you’ll either need to pay out of your own margins or increase the cost of your products to cover the cost. But if done right, absorbing this cost can have a huge pay-off.
Depending on your business and current profit margin, you don’t have to offer year-round free shipping. Instead, it can be used as a tactic to push specific items, offload extra inventory, or increase average order value (AOV) during sales events.
Here are some ways to offer free shipping conditionally or promotionally to benefit your business and your customers:
- With a minimum order value
- As a one-time promo code to gain new newsletter subscribers and customers
- Exclusively during peak sales periods like Black Friday and Cyber Monday, Christmas, or Mother’s Day as a promotion or an alternate to discounting
- On select products or combinations of products only to help clear extra inventory or one-off items
If your customers are already in buying mode, free shipping makes it easier to rationalize making the purchase and to reach the free shipping threshold. In fact, 48% of consumers will add extra items to their carts just to qualify for free shipping.
💡Tip: Set up free shipping rates in your Shopify admin.
Wildcraft displays their free shipping with a minimum order value of $35 in the promotion bar on their site.
How to calculate your free shipping threshold
If you decide to offer free shipping, there are a few ways to go about calculating the threshold number that’s right for you. To get started, one important metric is your average order value (AOV). For example, let’s say you have some orders already for the following amounts: $86, $112, $71, $65, $105. If you add them all up and divide by the total number of transactions (five in this case), you’ll get your AOV of $87.90.
You could also use the median order value (MOV) to calculate a free-shipping threshold. The median is the midpoint in a set of values that has an equal number below and above it. In other words, the median order value means that half of all your orders are above the median value and half are below it. Going with the orders example above, ranking these orders from lowest to highest, you’ll get the MOV of $86, which is right in the middle. The MOV has an advantage over the AOV in some cases when the average order value may be skewed due to outlier orders that are either super high or super low.
80% of consumers expect free shipping when ordering a certain dollar amount of products.
With this particular example, you might want to offer free shipping on all orders over $100. This will nudge your customers to reach an attainable free shipping threshold and also increase your average order size, which can give you additional profit to help partially cover the cost of free shipping.
Ideally, the free shipping threshold is set just high enough above your MOV or AOV that it nudges customers to add one or two extra items to their shopping cart, which they might not have otherwise.
Other free shipping threshold considerations
- Your standard shipping costs: These can be affected by average box size, geography (whether you’re shipping domestically or internationally), and the weight of the products you’re sending out. Determine both what you’re charging customers, as well as what’s being charged to you by carriers.
- Any other fees you pay on transactions, such as customs duties or credit card fees.
- The cost of the products, packaging, and your profit margin: How much of a hit are you willing to take to your overall profit?
- Your AOV: Keep in mind that there may be outliers, such as extremely high or low-price SKUs that can distort the value of your average cart.
Experiment with different thresholds above your AOV or MOV to find the minimum order number that performs best. There’s never a silver bullet for conversions—factors like price, images, and product innovation will all ultimately influence customer behavior differently.
And do embed the free shipping threshold throughout your customer experience, including not-so-subtle reminders during checkout. This will help coax more shoppers into adding items to their carts in order to qualify for the free shipping you’re offering. See how Allbirds does their $50 USD minimum free shipping and checkout messaging:
Get competitive shipping rates
When you’re offering free shipping, reducing the cost of each shipment is one way to make it more sustainable for your business. Delivery costs, including holiday surcharges, have been rising across the US as the pandemic drags on—and are expected to be the new norm. To minimize your shipping costs, research shipping options in your area to see if there are ways to save money by providing lower rates than retail pricing on the mail classes and services you need.
💡 Tip: If you’re selling in the US, Canada, or Australia, Shopify Shipping offers discounted carrier rates, whether you offer free shipping or not. Learn more about Shopify Shipping.
Add local delivery or local pickup
If you can’t offer free shipping on an ongoing basis, consider adding local delivery or curbside pickup. Data from Shopify shows that online shoppers spend 23% more and have a 25% higher cart size when local pickup and delivery are offered by independent businesses.
On a local scale, customers actively look to support their local businesses to help sustain their communities and economy. They’re also interested in local shipping and curbside pickup options because it offers enticing advantages. For ecommerce retailers, the unfortunate reality caused by the pandemic is shipping delays—and customers want to avoid it. Local delivery and pickup can offer price and delivery speed advantages over shipping.
Second, local delivery offers a way to create a personalized brand experience. Customers who shop locally are looking for that personal experience, and because you can't provide that in-store, local delivery is a way to do it. You can leverage this to connect with existing customers and attract new ones. For example, you can include a personalized packaging insert and thank them for their purchase or a personalized message in the delivery notification.
💡 Tip:Log in to set up local delivery or local pickup in your Shopify store’s Shipping and Delivery settings. Learn more about local delivery or local pickup.
Store your inventory closer to your customers
Over time, your order data will show patterns of what customers are buying, where they’re based, and how much they typically spend. This information will help you decide whether you want to store and ship products from multiple locations or outsource your fulfillment to a warehousing network. By storing your products closer to your customers, you can reduce carrier costs and offer now-standard free shipping, plus faster shipping speeds.
Something to consider: By relocating your inventory, you will incur new storage costs that will impact your profit margins. By speaking to a third-party logistics provider, you can better understand the exact costs you’d incur by outsourcing the pick, pack, and shipping process.
As order volume increases, many merchants begin to consider ways to outsource the pains of shipping so they can remain focused on scaling their businesses. The next big step of outsourcing your order fulfillment and offering free shipping requires looking at margins and better understanding how consistent fulfillment will impact your checkout conversion.
💡 Tip: If you’re selling in the US or Canada, Shopify Fulfillment Network offers fast order fulfillment for scaling DTC brands. Learn more about Shopify Fulfillment Network.
Revisit your shipping policies
How are you planning to keep up with customers’ rising shipping expectations? You’ll have to tinker with different free shipping thresholds and options to see which one leads to the highest profit margins. Keep in mind that this sweet spot threshold is not a “set and forget” number—your strategy will, and should, change as your business grows. Remember to revisit your shipping policies at key selling periods and growth milestones!
Free shipping conversion rate FAQ
Does free shipping increase sales?
Yes, surveys have shown that 80% of shoppers expect free shipping when ordering a certain dollar amount and that 66% of shoppers expect free shipping for all online purchases.
How do you calculate a free shipping threshold?
You can use either your average or median order value to determine free shipping threshold, though the median will have the advantage of not being skewed by outlier orders. Your free shipping threshold should be set just above the median or average, in order to nudge customers to spend a little more for free shipping.
How do you set up a free shipping threshold in Shopify?
- From your Shopify Admin, go to Settings > Shipping and delivery.
- Click Manage next to the shipping profile where you want to add your free shipping rate.
- Click Add rate.
- Name the rate and set the value of the Price field to $0.
- Click Add conditions, then select Based on order price.
- Enter your minimum order amount and click Done.
- Click Save to save the shipping rate.
How does free shipping impact conversion rate? ›
A good free shipping program should add value by increasing volume (i.e. higher conversion rates), driving higher pricing (i.e. selling items at a higher transaction price), and improving sales mix (i.e. shoppers order more expensive items or add more items to their shopping cart).Does free shipping increase conversion? ›
We've also learned that shipping costs increase conversion rates and impact the number of items and the total dollar amount that's added to shopping carts. From this we can conclude that free shipping helps customers get over the shipping cost hurdle and also entices them to buy more products.How does free shipping impact sales? ›
Multiple studies show that free shipping increases sales, order volume, and conversion rate. Since 88% of shoppers will choose free instead of paying for shipping, and 81% research multiple websites before purchasing, this perk can be the determining factor between buying from you or your competitor.Why do customers want free shipping? ›
Free shipping entices customers to purchase by wrapping all costs into the price of each item. Shopping carts are often abandoned at the checkout when customers are dissuaded by an additional shipping charge.What impact does free shipping have on its users and consumers? ›
Simply put, eliminating shipping costs makes the shopping experience better for customers. For E-commerce companies, faster shipping drives even more value. Another study says more customers are likely to purchase if they see a two-day (or even slightly longer) shipping period.Does free shipping make a difference? ›
Offering free shipping can make the customer feel like they are receiving a good deal. And because of that, they are more likely to finish the whole process and make the purchase. Not only will this reduce your overall shopping cart abandonment rate, but it will also improve your consumer experience.Do people buy more with free shipping? ›
90% of consumers say that free shipping is their biggest incentive to shop online. Moreover, 74% of consumers say that being transparent about shipping costs is highly valuable when searching for and buying products online, according to the Shopify eCommerce Market Credibility Study.How does free shipping really work? ›
Let's say an item's retail price is $20, and it costs $5 to ship. If the retailer charges $25 and announces, “free shipping”, then the customer is paying. This approach is still common among many third-party sellers on sites like Amazon and eBay.Do buyers prefer free shipping? ›
Yet, when given the choice between free shipping and fast shipping, an overwhelming 83% prefer free.Is free shipping good for business? ›
While free shipping is a fantastic deal for shoppers, it's also an effective marketing tool for small business owners. By placing a digital “Free Shipping” banner on your homepage, you're bound to catch potential consumer's attention. Free shipping can also be a great incentive to complete an online purchase.
Is free shipping a pricing strategy? ›
Free shipping is a cost-effective way to offer your customers an incentive to increase profit margins and customer satisfaction. It's one of the best ways to stand out among ecommerce competitors, so don't forget about this strategy when you're trying to grow your business!How do I tell customers about free shipping? ›
- Did Someone Say FREE Delivery? – ...
- Holy ship! ...
- Just for you: FREE Shipping on your order! – ...
- everything ships FREE – Jayson Home.
- Psst… your order ships FREE! – ...
- This weekend, gifts ship free! – ...
- Get FREE delivery on all orders! – ...
- LIMITED TIME: 50% Off + Complimentary Shipping – Mugler.
- Know your margins. ...
- Incorporate it into your pricing strategy. ...
- Use free shipping to increase your average order value. ...
- Optimize your packaging. ...
- Get competitive shipping rates. ...
- Offer short-term free shipping promotions. ...
- Offer free shipping on some products, not all products.
The environmental effects of shipping include air pollution, water pollution, acoustic, and oil pollution. Ships are responsible for more than 18 percent of some air pollutants.What are the advantages of shipping products? ›
Read on to learn the Top Five benefits.
- Economical. ...
- Efficiency. ...
- Oversized, heavy and bulky cargo capability. ...
- Safety. ...
- Environmental friendliness.
The study revealed that on every online purchase they make, 66% respondents expect to receive free shipping. More specifically, 80% of those polled expect free shipping on spending a certain amount online.What is the meaning of free shipping? ›
noun. the delivery of mail directly to the recipient's address without charge to the recipient: Before free delivery people had to pick up their mail at the post office or pay a letter carrier to deliver it.Why is shipping important for a business? ›
Shipping impacts the end-quality of your products
Poor shipping practices can negatively impact the customer's impression of your company. When a product is not shipped on time, it arrives damaged, or worse, the wrong product is shipped, the quality of the shopping experience is significantly diminished.
Shipping is the first point of physical contact with your customers when it comes to online purchases. Hence, it is important to provide your customers with a great shipping experience to keep them returning to your e-commerce website.How does shipping cost affect business? ›
Higher shipping costs initially affect prices of imported goods dockside within around 8 weeks which then pass on to manufacturing costs. It is then expected that the impact on end consumers begins to build up and peaks after around 12 months.
What is the most cost effective shipping method? ›
The most cost-effective option is typically to ship via the United States Postal Service (USPS). The exact cost will depend on the package's size and weight, the destination, and the type of service used.How do you make shipping affordable for customers? ›
- Offer local delivery or pickup. Don't use a third-party delivery service at all. ...
- Reduce the weight of packages. ...
- Join a business association. ...
- Use Canada Post. ...
- Stick with ground shipping. ...
- Pick a shipping partner. ...
- Use everything your courier's got.
Free shipping gives you a serious competitive edge that can help you outcompete your rivals. It can even make you a more attractive proposition than larger companies. This is a massive advantage to wield.What are the disadvantages of free shipping? ›
- Free shipping could affect your bottom line. The most obvious drawback of free shipping is, of course, the increased cost. ...
- Increases product prices. ...
- Alters customer behaviour. ...
- Increases returns. ...
- Free delivery could harm your High Street performance. ...
- Bad for the environment.
Free shipping helps to increase average order value:
An increase in any business's average order value means revenue increases. You need to set a minimum purchase threshold for your store to get this particular benefit of free shipping.
90% of consumers say that free shipping is their biggest incentive to shop online. Moreover, 74% of consumers say that being transparent about shipping costs is highly valuable when searching for and buying products online, according to the Shopify eCommerce Market Credibility Study.What is the strategy for free shipping? ›
The most common strategy for offering free shipping over a certain amount is to get some sales under your belt and determine your average order value, then offer free shipping on all orders X% greater than your average order amount.Which are the most important benefits of free competition? ›
- Competition is beneficial to the country's economy. ...
- Competition ensures better prices. ...
- Competition favours consumers. ...
- Competition is beneficial for companies. ...
- Competition favours the creation of companies. ...
- Competition promotes innovation. ...
- Competition promotes exports.
The cost – which is more affordable when compared to rail, road, or air freight with fewer maintenance expenses. It's the best way to transport bulky goods – heavy items can be moved with ease as ships are suitable to carry machinery and industrial parts unacceptable for air freight.Is free shipping safe? ›
Yes! The retailers listed on FreeShipping.com are all reputable, and the savings you'll earn shopping at those stores are real. We take the privacy and security of every member seriously.