How to calculate The Best Free Shipping Threshold for Ecom Brands

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The Ecommerce Uptick

Daniel Chabert

72 episodes

4 days ago

The Ecommerce Uptick is your guide to growing your DTC ecommerce brand on all fronts. Lead by Daniel Chabert - Multiple 7-figure Ecommerce Exits from brands like Rockay, Sleeklens & Gringo Media Group. Today he runs Purplefire.io - A Full CRO agency. Want more from me? visit my site here: https://bit.ly/42Ialpt I will be covering topics like: Conversion Rate Optimization, advertising, email-marketing, Shopify apps and much more. Not only that, I will be sharing the insights and obervations I make daily from working with top DTC brands across the world.

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How to calculate The Best Free Shipping Threshold for Ecom Brands | Ep. 59

The Ecommerce Uptick

14 minutes 10 seconds

1 year ago

How to calculate The Best Free Shipping Threshold for Ecom Brands | Ep. 59

how to find the best free-shipping threshold for DTC Ecom Brands.
What are your business goals?

Do you want to increase your AOV?Do you want to increase your profit?

Do you want to increase your conversion rate?

Do you want to maintain your margins?

AOV:

Simple find your AOV now and start testing different thresholds.Test 10-20-30-40% above and see what it does to your conversion rate, AOV, revenue per visitor.We find that those ranges work very well but should be tested. On shopify that can be tested with shipscout https://www.shipscout.app/

Do you want to increase your profit?

Test - using “profit per visitor” as your main metric.Just keep in mind that overall conversion rate can be an important metric for profit too.This is because a high conversion rate can lead to more repeat orders over time.Track LTV after 3,6 and 12 months as well.Easiest way to increase profit per visitor is testing higher AOV thresholds. Using the same method as above.

Alternatively you can charge more for shipping and test if it increases profit per visitorDo you want to increase your conversion rate?

The general rule of thumb is that the lower your free-shipping threshold, the higher your conversion rate. This allows people to buy without paying for shipping.Today everyone offers free shipping at some threshold, it means it doesn’t work as well as it used to.

I recommend testing benefits, gifts and other things in your cart to increase conversion rate.

Upcart - shopify

Rebuy - shopify

Do you want to maintain your margins?

Gross Profit: 40% = 0.4AOV: $75Avg. shipping & fulfillment costs: $10

Plug the values into the formula:

Free shipping threshold = ($10 average shipping cost / 0.4 gross profit margin) + $75 average order value
Free shipping threshold = ($10 / 0.4) + $75
Free shipping threshold = $25 + $75
Free shipping threshold = $100

In this example, with a $75 average order value, $10 average shipping cost, and 40% gross profit margin, the calculated free shipping threshold comes to $100. This means by offering free shipping on orders over $100, you would theoretically absorb the shipping cost while maintaining your profit margin on the average order.