Ecommerce Expertise / How To Sell Online

How to Increase Your Average Order Value With Free Shipping

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If you don’t offer free shipping from your online store then you’re missing out on a substantial amount of revenue. While you might initially think that offering free shipping will erode most or even all of the profit in the order, I can tell you that it wont — if you use a simple strategy.

Using free shipping as a motivator for customers to buy from you can help increase your average order value by up to 30% in just a few short months. You simply need to work out your average order value and average shipping cost, and then offer free shipping on your average order value + 10%, or whichever amount covers your average shipping cost and provides enough of a profit to slightly increase your average order value.

If you repeat this process every 3-4 weeks, your average order value will increase by 30% or more in just a few months. The basic idea here is that a certain percentage of your customers will be willing to spend more with you on each transaction in order to “trigger” the free shipping option you setup. This creates a win-win situation: your customers get free shipping and you increase your average order value resulting in a better bottom line for your business.

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  • Sid

    It would be awesome if the paid for shipping option disappeared when the free shipping threshold was reached.
    As it is, stores on bigcommerce that offer ‘free shipping over $amount’ look very silly when that threshold is reached! The standard shipping option is displayed, as well as the ‘free’ one! Who on earth would pick the standard non free option? This really ought to be fixed.

    For what it’s worth, shopify does it right.

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  • I did this a while back in one of my ecommerce stores and had a substantial conversion increase… There was one large glaring issue I found with this strategy was that for this site we have thousands of products ranging from < 1lb to < 250 lbs. Clearly this was killing our margins….

    To solve this we did the following…. First take each SKU's weight, the location of it's origin and figure out the furthest destination code that this item could be shipped to. For us this part was easy, we only ship to the continental US and most of our warehouse locations are a zone 2 so the max we ship to is a zone 8. Just get a single zone 8 zipcode and since all zipcodes in a zone have the same shipping cost that's all the data we needed. From here we went through each item, calculated the HIGHEST shipping cost of this item, then could add this cost to each time that we wanted to offer free shipping on.

    Using this method, we know that in the very WORST case we'll breakeven on a free shipping item that has to be shipped to a zone 8 (in our case). For every other destination in the US we're in the black. This has allowed us to offer free shipping, know our margins ahead of time and be extremely competitive on price.

    I'd like to start by saying that this is totally not a sales pitch but…. because a free friends first asked us for it we started to offer this as a product to others (currently Magento only) for a small fee. We allow users to upload their products and all at once calculate a breakeven worst case shipping price for every product in their database. Honestly you can totally do it by hand in Excel if you would rather. We offer this as a service because once you get to 100+ products using the UPS website to calculate the shipping price of every product a gets a tad repetitious.

    If you want to check it out we would love to hear your feedback – http://sparkshipping.com

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  • Very good video. I wish they had this when I first started in e commerce.
    Thanks.
    Ax

  • Name

    Thanks for the video. Where did your average shipping cost come into the calculation that works out FST?

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