How to Calculate the Best Free Shipping Minimum for Your Business

Illustration depicting arrow pointing at words "free shipping"

Amazon recently announced that to qualify for free shipping, shoppers will either need to have a Prime membership or purchase at least $49 in goods per order. While there has long been a minimum purchase for non-Prime members, until recently that amount was only $35. Amazon’s goal is to make its $99 Prime membership look more attractive.

If you’re a business, this may be the perfect time to review your own shipping minimums to make sure you’re attracting customers without cutting into your earnings. Here are a few tips for setting minimum purchase amounts for your free shipping offers.

Evaluate Shipping Costs

Before you can make any decisions about your profit margins, you’ll need to gain full awareness of the cost to ship each item you sell, whether the customer is across the street or on the other side of the country. Find ways that you can reduce those costs without sacrificing the quality or speed of your shipments. Review your shipping mix and the options offered by each carrier and you’ll likely find a few ways you can ship the same items for cheaper.

Conduct A/B Testing

A/B testing is the best way to monitor whether your free shipping offerings are actually generating interest. For example, if you’re already offering free shipping for orders $50 or higher, try a new campaign where you offer free shipping for orders of only $25 to some of your customers through an email discount offer. The other group of customers should receive the same $50 shipping threshold you’ve always had. You can then use the results to determine whether the lower $25 shipping threshold results in more conversions.

Consider Memberships

If your business is the type that attracts recurring customers, consider offering a membership-based free shipping model. This setup has worked well for Amazon, which gives multiple other benefits to members including free movies and book downloads. You could provide those benefits in the form of special VIP discounts and access to products before they release. The monthly fees you have coming in will help offset any losses you suffer in shipping costs. Having unlimited free shipping may also encourage your customers to buy from you more frequently since they don’t need to meet a minimum purchase threshold to qualify for free shipping, thus boosting your business’s monthly income.

Free shipping is essential to success for today’s online businesses. However, it’s important to ensure you’re setting your minimums high enough to still make a profit. By fully understanding your shipping costs and monitoring conversion rates, you can find the perfect price point to keep your customers happy without cutting into your profits.

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