Wondering how to offer free shipping without lowering profit margins in your ecommerce fulfillment process? Check out these effective free shipping strategies for ecommerce fulfillment.

Illustration: Melanie Peters

Free shipping is making a huge impact on the purchasing decisions of shoppers around the world. According to Shippo's 2023 State of Shipping Report , more than two-thirds of consumers said they wouldn't consider purchasing from a retailer that didn't offer free shipping.

Shipping is one of the most important elements of the online shopping experience. It significantly influences customers' purchasing decisions and is a major factor in cart abandonment. For fast-growing retailers, free shipping offers an opportunity to streamline checkout and encourage more customers to click the purchase button.

To meet these expectations, successful retail brands must rethink everything from where their products are produced to how they are delivered.

We explain why free shipping is important and how to offer it without compromising profitability.

What is free e-commerce shipping?

Free shipping in ecommerce means that online retailers offer customers free shipping on purchased items.

By eliminating shipping costs for certain items, online retailers encourage consumers to purchase those products. Free shipping is often a competitive advantage for online businesses.

Free shipping isn't available on all purchases. Many e-commerce stores offer free shipping to encourage more customers to buy online.

Consumers often must meet eligibility requirements to receive free shipping. Examples of retailers offering free shipping include:

• You may require customers to reach a minimum order amount to receive free shipping. For example, you could offer free shipping on orders of 30,000 won or more.
• We offer a limited-time free shipping promo code to new email newsletter subscribers.
• We offer free shipping only during major sales periods.
• We offer free shipping as part of our customer loyalty program.
• We offer free shipping on select products or sets of products.

Retailers set these conditions to ensure that free shipping doesn't negatively impact margins. Some online stores always offer free shipping, regardless of the customer's purchase amount. This can enhance the shopping experience and build brand loyalty.

Free shipping is attractive to customers who prefer a simple pricing structure. It also helps customers avoid unexpected additional fees during the checkout process.

Brands often use free shipping policies as part of their marketing strategy to entice customers to shop with them. For example, sustainable packaging brands like Package Free offers free domestic shipping on orders over $65 and advertises this on the top banner of their website.

Similarly, clothing brand Allbirds offers free shipping (within the US) on orders over 75,000 won. Shipping terms are listed directly below the product description.

The threshold for free shipping will vary depending on your brand's margins, goals, and shipping costs.

Steps to Offer Free Shipping

Wow 75% of consumers said they prefer free shipping over expedited shipping, indicating that cost savings are more important than delivery speed. Offering free shipping is no longer a "nice-to-have" option; it's a necessity.

But even free shipping ultimately comes with a cost. Shipping always costs money. E-commerce businesses face the challenge of balancing costs while offering free shipping to customers.

Here are three ways to avoid losses while offering free shipping to your customers.

Product price increase

To offer free shipping on all products, you'll need to either raise product prices or cover shipping costs from your margins. This will allow you to keep pace with the growing global demand for fast shipping.

However, if raising the price of your product might make it too expensive for your customers, you may want to consider sourcing your product from an area with lower shipping costs.

Gary Grant, founder and chairman of British toy store The Entertainer, recently said: In an interview with Time magazine , he said, “We had to stop importing giant teddy bears from China because we had to double the retail price to reflect the increased shipping costs.”

For a free shipping strategy to be effective, you must always consider whether your product price point is appropriate. For example, if you sell low-priced products, raising the price to provide free shipping could result in losing more customers than gaining them.

Increase customer lifetime value (LTV)

Free shipping is a hallmark of a great customer experience. When customers enjoy shopping with a brand, they're more likely to make repeat purchases.

By increasing customer lifetime value, brands can offset the cost of free shipping. If they can persuade customers to continue purchasing, offering free shipping makes sense.

Free shipping helps e-commerce stores differentiate themselves from competitors. Customers may prefer to shop at retailers that offer free shipping. For example, Amazon Prime generates high LTV through its subscription service, which offers free shipping on most items. Many customers benefit from free shipping. This is the main reason I choose Amazon .

Bundle Offer

Nearly half of consumers add additional items to their carts to receive free shipping. Bundling frequently purchased items together can help increase your average order value (AOV) and reduce shipping costs. The more items you can ship together, the lower the cost of shipping a single item.

Anders Ankalid, CEO of A Good Company , says free shipping is only sustainable when multiple items are purchased at once.

"We don't think it's sustainable to buy one laptop and expect free shipping," he says. "That's why we're encouraging customers to buy a little more at a time. That way, they can bundle products at a better price, and we can deliver our products in a more sustainable way."

Recommending product bundles to your customers makes it easier for them to find the items they want. Instead of searching across your site for similar items, they can purchase them together in a bundle.

This is a successful fulfillment strategy for both businesses that fulfill orders and those that outsource fulfillment. By building bulk kits based on customer purchase history and trends, businesses that fulfill orders in-house can save time. Businesses that outsource fulfillment can save time and money because bundles are considered a single SKU.

Calculate the minimum free shipping requirement

The minimum free shipping threshold is the minimum purchase amount you're willing to offer free shipping to customers. This threshold varies based on factors such as shipping costs, average order value, and customer spending habits.

For example, DTC cookware brands Great Jones offers free shipping on orders over $100, encouraging customers to order multiple items.

When a customer adds an item to their cart, Great Jones reinforces its free shipping incentive with an in-cart offer. For example, a large ovenproof dish might cost $75, but a mini ovenproof dish, priced at $50, might be recommended alongside it, encouraging the total purchase price to exceed the free shipping threshold.

How to Calculate the Free Shipping Minimum

If you decide to offer free shipping, it's important to accurately calculate the minimum purchase amount that suits your business.

One key metric here is the Average Order Value (AOV). For example, let's assume the order amounts already received are 75,000 won, 100,000 won, 150,000 won, 200,000 won, 300,000 won, and 350,000 won. Adding these amounts up and dividing by the number of orders (in this example, 6), the average order value comes to approximately 166,000 won.

Another way to set the median is to use the median order value (MOV). The median is the exact middle value when all order amounts are sorted by size, with half having values less than it and half having values greater than it.

In the example above, the median is 150,000 won, which corresponds to the exact middle of the sorted amounts. MOV can be more useful than AOV, especially when the average is distorted by extremely high or low values.

The ideal free shipping threshold is set slightly above the average or median purchase amount. This will naturally encourage customers to purchase one or two additional items they were hesitant to purchase.

Things to Consider When Calculating Your Free Shipping Minimum

When calculating your free shipping minimum, always keep the following factors in mind:

• AOV: Remember that outliers, such as SKUs with extremely high or low prices, can skew the value of the median.
• Average shipping cost: This can be affected by the average box size, geographic location, and weight of the product being shipped. Determine both the amount charged to the customer and the amount charged to the carrier.
• Transaction Fees: Consider other costs, such as taxes and credit card fees.
• Products, Packaging, and Margins: How much of your overall revenue can you afford?

Once you've identified your baseline, conduct A/B testing on your site to determine the optimal free shipping threshold that will boost both conversion rates and revenue. Next, it's crucial to seamlessly integrate this threshold throughout the customer shopping experience. For example, implementing a "free shipping progress bar" that shows customers how much time is left until free shipping as they shop can help them realize the benefits and continue shopping without hesitation.

Free Shipping Minimum Standard Best Practices

Experiment with different free shipping thresholds, starting slightly higher than the median or average order value, to find the one that works best. There's no one-size-fits-all formula for increasing conversion rates. Factors like price, image, and product innovation all have different impacts on customer behavior. Through consistent testing, you can gradually increase the threshold and find the point at which customers naturally accept it.

It's important to seamlessly integrate the free shipping threshold throughout the customer experience. Especially during the checkout process, use appropriate notifications to encourage customers to add more items to their cart and take advantage of the free shipping offer.

To recap, your free shipping minimum order amount must meet the following:

• Allowing consumers to reasonably feel they can 'take a little more'
• Provide positive motivation by gaining 'something of value'
• Properly utilize the inconvenience of having to pay for shipping costs that were usually free to encourage purchases.

3 Benefits of Free Shipping

Free shipping has three main benefits:

• Reduce shopping cart abandonment rates
• Inducing customer purchases
• Reflecting customer preferences for various delivery options

Reduce shopping cart abandonment rates

2023 According to Baymard research , the leading reason (47%) for shopping cart abandonment in the United States is that “additional costs are too high,” which includes shipping, taxes, and other fees.

The current shopping cart abandonment rate in the United States is This figure reaches 86% for mobile users and 77% for desktop users . Therefore, it's crucial to find ways to encourage customers to complete their purchases.

Offering free shipping helps customers avoid being surprised by additional costs, makes it easier to complete checkout, and reduces the likelihood of last-minute cancellations.

Shopify store Sophia Rinkert Williams, owner of Luna's Link , agrees that offering free shipping makes it easier for customers to make a purchase.

"Psychologically, free shipping creates a smoother and more seamless checkout experience. Shoppers experience fewer pauses during checkout, which leads to faster sales," he says. "I've abandoned my shopping cart because the checkout process was too cumbersome or expensive. The faster and cheaper the checkout process, the better!"

Inducing customer purchases

Free shipping is often more effective than discount codes at encouraging online shopping and membership signups. Sustainable T-shirt Store Sofia Voudouroglou, Head of Content Marketing at Teemill , explains that occasional free shipping offers lead to a spike in sales on weekends.

"We regularly run a free shipping weekend from Friday to Sunday," he says. "We support free shipping during this period to help store owners maintain the same profit per item. We've found that a free shipping weekend once a month, around payday, has the greatest impact on sales, more so than 'buy one get one free' deals or discount events."

Short-term free shipping promotions are also effective at boosting sales. Voudouroglou adds, "During our most recent free shipping weekend in early June, Teemill brand sales tripled compared to normal. On average, during promotional weekends, store traffic increases by over 20% and sales increase by over 24%."

Reflecting customer preferences for various delivery options

People appreciate a wide range of options, so when offering free shipping, don't stop there. It's a good idea to also offer a variety of shipping options. For example, if you want expedited shipping, you can offer it for an additional fee.

Offering customers multiple shipping options allows them to choose the option that best suits their preferences. For example, you could offer standard free shipping by default. Customers would receive their items within 5-10 business days, but if they want to receive their items faster, they can pay an additional shipping fee of 10,000-40,000 won.

Providing sustainable delivery options to customers

Offering eco-friendly shipping options is a great way to add sustainability to your retail brand. Allowing customers to choose an environmentally friendly shipping method at checkout makes them feel like they're participating in your environmentally friendly efforts.

Shopify Partner Signup Autumn Blakeman, senior director of ecommerce at Cake Agency , says that brands can help customers make more environmentally friendly choices by offering a variety of shipping options.

“Some sites offer consumers the opportunity to make more sustainable choices, such as choosing ground truck delivery instead of air,” he explains.

Additionally, there are ways to help customers offset their carbon emissions when making payments. For example: Shop Pay supports tree planting with every purchase, helping reduce the environmental impact of shipping.

Offer free shipping to your customers using Shopify Plus.

Shopify Plus lets you set free, fixed, or calculated shipping rates that customers see at checkout.

Global Domestic retailers in the United States can set up shipping zones, which group countries or regions for specific shipping rates. For example, you could set a flat rate of 5,000 won for a US shipping zone and a flat rate of 2,500 won for orders over 50,000 won.

Alternatively, you can use shipping profiles to set different shipping rates for specific products and locations. For example, if a customer purchases 5kg of protein powder, you could set a fixed shipping rate of 4,000 won, but offer free shipping for orders of three or more.

You can add free shipping rates to all shipping zones or profiles to avoid paying shipping fees at checkout. Alternatively, you can offer free shipping when certain criteria are met. These criteria can be based on a minimum order amount or orders exceeding a certain weight.

Shopify Plus lets you set free shipping as a default for all orders. This makes it easier to manage your shipping rates, and allows you to add additional paid shipping rates for specific products or orders over a certain value or weight.

Here's how to set free shipping as your default rate:

• From your Shopify admin, go to Settings > Go to Shipping and delivery .
• Click Manage next to General shipping rates.

Add free shipping rates for each shipping zone.

• Click Add rate.
• Enter a name for the fee.
• Check if the value in the price field is 0.

Click Done, then click Save.

How Bathorium Cut Shipping Costs by 70%

Greg MacDonald, Success Manager for Shopify Plus Stores, says his store: We founded and operate Bathorium . Since Bathorium is headquartered in Canada, we are able to reach our US customers efficiently. Partnering with a 3PL has been key to our success.

Shipping products from Canada to the United States was expensive, volatile, and costly, averaging about 50% of the average order value. Before partnering with a 3PL, Bathorium spent $18 to $25 per pound (approximately 0.45 kg) and delivery took at least 7 to 10 business days.

Bathorium is By partnering with ShipBob to handle our logistics within the US, we were able to reduce our US shipping costs by up to 70%. This resulted in increased conversion rates and doubled our US customer base from 20% to 40% within a year.

"Increasing delivery speed and keeping shipping costs affordable for our customers are our top priorities," says Greg. "ShipBob makes it much easier for us to calculate shipping costs for each order by accurately tracking product weight and destination zip code. Knowing the exact shipping cost allows us to effectively manage our marketing spend."

Start using our free and fixed-price shipping service today.

Free shipping is a powerful marketing tool. It relieves customers from the worry of unexpectedly high shipping costs when placing an order. Furthermore, today's consumers expect free shipping, or at least the option to do so.

Whether free shipping is actually free or the perception of free shipping is given to customers who meet certain conditions, it is a key factor in e-commerce store To increase conversion rates It's a great help.

Offering free shipping on your online store can reduce cart abandonment rates, increase average order value, and encourage more customers to sign up for your loyalty program.

Free Shipping and 2-Day Delivery FAQs for E-Commerce Fulfillment