Free Shipping Strategy Guide: When & How to Offer Free Shipping

Free shipping increases conversions but can hurt margins if done wrong. Here's how to implement it profitably.

The Free Shipping Effect

Impact on Conversions

Customer Psychology

Free Shipping Models

Model Comparison

Threshold Strategy

Calculating Your Threshold

Formula

Optimal threshold = (Average order value × 1.2) rounded up
Example:
AOV = $45
Threshold = $45 × 1.2 = $54 → Round to $50
Or calculate break-even:
Threshold = Average shipping cost / Target margin increase

Testing Thresholds

Funding Free Shipping

Cost Absorption

Example Calculation

Before free shipping:
Product: $40, Shipping: $5 = $45 total, 30% margin = $13.50
With free shipping (price increased):
Product: $45, Shipping: Free = $45 total, 25% margin = $11.25
Volume increase needed: 20% more orders to match profit

Product-Specific Strategies

By Product Weight

By Price Point

Display & Messaging

Website Display

Progress Indicator

Your cart: $35
━━━━━━━━━━━━━━━━━━━━━○
Add $15 more for FREE shipping!
[Shop More] or [Checkout - $5.99 shipping]

Competitive Analysis

Market Expectations

atoship & Free Shipping

Make free shipping profitable:

Discounted rates: Up to 89% off carriers

Rate shopping: Cheapest option per package

Cost visibility: Know actual shipping cost

Margin calculator: Plan profitably

Implementation

Rollout Plan

Conclusion

Free shipping drives conversions when implemented strategically. Use thresholds to increase order value, fund with carrier discounts through atoship, and test continuously to optimize your approach.