Member Avatar for scott.orenstein.12

How many of you who have an on-line store today charge for shipping ? Anyone offer free shipping all year round ?

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A short expert addendum that ties together the thread and adds actionable steps not yet covered. Earlier posters , and raised the right tradeoffs: free shipping can lift conversion but can also erode margin. Below are concrete calculations and operational checks to set a safe free-shipping policy and avoid unpleasant surprises.

A practical way to pick a free-shipping threshold is to start with a target gross margin and back into the minimum cart value that preserves it. Let avg_COG be the average cost of goods per order, avg_shipping the average carrier cost the merchant will absorb, and target_margin the desired gross margin (decimal). Solve for threshold T:

T >= (avg_COG + avg_shipping) / (1 - target_margin)

Example: avg_COG = $20, avg_shipping = $4, target_margin = 0.40 -> T >= (24) / 0.6 = $40. Use the resulting number as a floor and round to a psychologically sensible level.

Operational checks and caveats not yet discussed: dimensional-weight pricing, residential/remote surcharges, declared-value/insurance fees and returns handling can all push avg_shipping up—measure these separately. Use SKU-level shipping profiles so heavy or fragile items are excluded from blanket free-shipping offers, or require a paid-additional-shipping option. Consider packaging changes (smaller poly mailers, right-sized boxes) and negotiate commercial label discounts through an aggregator or fulfillment partner to reduce avg_shipping.

Measure everything. Run an A/B test that compares current shipping-charge pricing to a free-shipping threshold, and track AOV, conversion rate, and profit per order (not just conversion). If free shipping is offered, present it clearly at cart-level with the expected delivery window and show the "savings" so the uplift is maximized without surprising margins.

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Member Avatar for pthomasgarcia

I sell on eBay quite often, and in most cases I prefer to offer free shipping, unless the item is of substantial weight and I pay a professional to package it, whereby the cost becomes too much to bear and it makes better sense to be open about all costs.

However, most items I ship cost about $5 for USPS Priorty Mail, which doesn't much bother me to eat the cost, because I still have good margins, and listings with free shipping often do better.

Other times, shipping may cost $10, at which point I may or may not include the shipping cost in the price of the item, all determined by the margin. Yet, in no case has the time made a difference in determining what I offer, be it free shipping or not.

Edited by pthomasgarcia because: grammar
Member Avatar for scott.orenstein.12

Hi,

The cost of Shipping should never eat into your profits.It's usually the packaging that hurts as it can cost more than the actual freight.

Member Avatar for PixelatedKarma

To add to what Scott said, one thing we have encountered in the past is a Company will work out a contract flat rate agreement with a shipping company (UPS/Fedex/etc) and if they offer their products in say 3 countries they will average the shipping cost across all three countries (sometimes even weight the average moreso towards the most shipped to out of the three). They will then use that average number and calculate it into the COG (Cost of Goods).

This way it never is a loss in profits but its an amount that is actually factored into the product's cost to the Company; this way when they keystone the product for retail/distribution pricing the customer is actually paying more for the shipping then they actually would have if they just paid the shipping rate - BUT the Company puts on a good face because they offer "free" shipping.

To put it into an example;

You build widgets that cost $4 to build. Shipping costs $2 to the US, $3 to Canada and $6 to the UK. The US accounts for 75% of your sales, 15% come from Canada and 10% come from the UK. So effectively you'd come out with a weighted average of $2.55 (if my math is correct) for shipping bringing your COG to $6.55. You keystone at say 1.5 for distributors/wholesale and 3 for retail so your wholesale prices are going to be $9.83 and $19.65 - because you've calculated your shipping into your COG you've charged each wholesale distributor $3.83 and each retail customer $7.65 for shipping but you've included it in the price; you then can market it as being free shipping even though you've more then covered your shipping costs in the case of B2C.

Member Avatar for scott.orenstein.12

Exactly. There should be no guilt with making a few cents - ? on this category as if someone is going to pay $5.75 as an example for shipping then $5.95 is not an issue. I also suggest using a .50 or .95 or .99 cent ending. Think of it like a gas station . You never see anyone selling gas for $3.00 per gallon. It's most likely $2.99 9/10 all in. It's totally a mind game but you should control the outcome.

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