Free shipping isn’t just a perk–it’s an expectation.
PYMNTS reports that in 2025, 66% of consumers look for free shipping when shopping online.
Between rising costs and tighter margins, many online sellers are asking the same question: How can I mitigate the financial impact of offering free shipping?
The Impact of Free Shipping on the eCommerce Landscape
The Amazon Effect
Amazon’s shipping model has raised customer expectations for two-day shipping in recent years and continues to affect shopping experiences as fast and free shipping is the standard.
However, despite speed being an increasingly important factor, a 2024 Sifted survey found that “price of the item” is still ranked #1 as most important to consumers.
Cart Abandonment
Additional shipping costs may be leading potential customers to abandon their carts during checkout. In fact, a study from the Baymard Institute reports that 70.19% of online shopping carts are abandoned.
Imagine the profit if your business could prevent even a fraction of these abandonments?
Inflation & Price Increases in the Parcel Industry
Every year, shipping costs rise due to inflation, and shippers have to adjust fast. But in 2025, ongoing tariffs and financial uncertainty are hitting shippers and consumers’ wallets as well.
How are Shipping Costs Calculated?
Shipping rates are determined by a variety of factors, two of which can be package size and weight. Calculating your dimensional weight (DIM weight) ahead of shipping can help you understand the cost to ship based on volume.
Other major players when it comes to your shipping costs include carrier choice (UPS, USPS, etc.), delivery zone and speed.
How to Approach Free Shipping in Your Pricing Strategy
Shipping is never really “free.” Someone pays for it—either the business, the customer, or a mix of both. The good news? As the merchant, you control how much of that cost gets passed on. It’s a strategic decision that can affect everything from your margins to customer loyalty.
Benefits of Offering Free Shipping
Improved Customer Loyalty
Consider offering free shipping as part of a membership, loyalty, or rewards program to retain customers.
Brands like Zappos built customer loyalty on their free shipping and free returns policy, creating a retention strategy. Loyalty members can feel more “invested” in a brand that gives them perks.
Greater Competitive Edge
Providing free shipping can help your business stand out in a crowded market. Amazon Prime is the gold standard of retaining their customer base via free shipping access for members.
Appealing to price-conscious first-time buyers of your products, who may be comparing options, gives you the advantage in the long run.
How Shippers Can Offer Free Shipping
Include Shipping in the Product Price
Customers often prefer a single, upfront cost–even if it’s slightly higher.
By incorporating the cost of shipping into the price of the product, you can adjust the perceived value of the item vs. the real cost. This strategy works especially well for lower-cost items.
Regardless, customer transparency matters. Ensure you communicate value clearly to avoid backlash over “hidden” fees. (I.e. “This $30 tee includes free shipping–no surprises at checkout!)
Set a Minimum Purchase Threshold
Encourage larger orders by offering free shipping on orders over a set amount. This is called increasing your average order value, or AOV, a practice common on eCommerce sites. You can set the minimum based on your current AOV or most common product bundles.
Some examples of what this could sound like on your website:
- “Spend $50 to get free shipping!”
- “Add $7 more for free shipping.”
- “Are you sure you want to check out? Spend $10 to earn free shipping!”
This is an opportunity to gamify the checkout process, adding bars, popups, or alerts that show a customer how close they are to free shipping.
Seasonal & Event-Based Discounts
You can create a sense of urgency by running limited-time free shipping offers to drive conversions.
This is an opportunity to align your marketing calendar with peak buying times like Black Friday, back-to-school, etc. You can even consider layering with other promotions (like “free shipping plus 10% off”) to create more perceived value in the promotion.
Some examples of how you can offer these types of discounts:
- “Don’t forget to grab a gift for mom. Free shipping now through Mother’s Day.”
- “Free shipping now through July 4th–stock up before the fireworks!”
- “Holiday deals all season long–snag free shipping now through December 25.”
Reward/Membership Programs
Offer free shipping as an incentive for customers to join loyalty programs or sign up for email communications. This strategy encourages customers to stay engaged and return more frequently to your brand. You can even offer free shipping for VIPs or top spenders through a tiered access membership or loyalty program.
Brands like Abercombie’s myAbercombie loyalty program include free shipping benefits to members.
Offer Ground
Offering the most economical (ground) option for free shipping and then more premium options for a cost, could be a practical way to offer free shipping to your customers.
This way, customers get free shipping and you control fulfillment expenses.
The key here is to set clear expectations about the arrival window. For instance, “free 5-7 day shipping” or “2-day shipping” for a premium price.
This is a great way to give customers a choice while managing your margins.
Is Free Shipping Always a Smart Choice?
Free shipping can drive conversions, improve loyalty, and give you a competitive edge—but it’s not a one-size-fits-all strategy. The truth is, free shipping isn’t always the most profitable option for every business.
Before jumping in, consider things like:
- Can your margins absorb the cost?
- Will free shipping actually improve performance—or just cut into your profits?
- Are there better ways to provide value to your customers?
When Free Shipping Doesn’t Make Sense
- Low-margin or heavy/bulky products: The cost to ship may outweigh the benefit
- International orders: Shipping rates and complexities can vary widely
- High return rates: Free shipping in both directions can become a financial drain
Free shipping should support your business goals—not sabotage them. That’s why understanding your shipping profile is key.
Use SiftedAI to Resolve Inefficiencies & Offset Shipping Costs
SiftedAI gives you the visibility and control you need to make smart shipping decisions. By analyzing your shipping profile, SiftedAI uncovers:
- Which surcharges are driving up your costs
- Where you’re overpaying on carrier contracts
- Opportunities to improve packaging and reduce DIM weight
- Which services or zones are dragging down profitability
These insights help you reduce costs without cutting corners—so you can offer perks like free shipping without hurting your bottom line.
For example, Jewelry leader Stuller used SiftedAI’s forecasting and GRI analysis tools to pinpoint how much their shipping should cost. By modeling the impact of upcoming carrier rate increases against their actual shipping profile, Stuller was able to confidently set shipping rates that protected their margins—without passing unexpected costs on to customers. It turned shipping complexity into a competitive advantage. Read the whole story here.
Want to achieve similar results? Schedule a demo of SiftedAI and receive a no-cost analysis of your shipping profile.
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