--- title: "Free shipping: definition, formula and example" description: "Charging the customer nothing for delivery. The carrier still gets paid, so it is a revenue decision that costs what shipping used to bring in." url: https://offersuite.io/glossary/free-shipping updated: 2026-10-13 --- # Free shipping Charging the customer nothing for delivery. The carrier still gets paid, so it is a revenue decision that costs what shipping used to bring in. ## In plain words Free shipping means the customer pays nothing for delivery. It removes the most common reason a cart is abandoned at the last step, which is why so many stores offer it. Nothing about the cost changes. You pay the same label. What goes away is the shipping revenue the order used to bring in, less the fees that were charged on it. Free shipping is a discount with a different name, and its size is what you used to charge. ## Formula - Cost of free shipping per order = shipping previously charged × (1 − costs charged as a share of revenue) ## Worked example With $7.00 charged for shipping, the coffee bag's order brings in $47.00 and keeps $21.81. Shipped free, it brings in $40.00 and keeps $15.36. The label is $7.50 either way. Free shipping has to bring 42.0% more buyers to earn the same per visitor. ### The example order A $40.00 bag of coffee, shipped free, every cost counted Revenue $40.00 to contribution margin $15.36 (38.4%) Revenue $40.00 Cost of goods −$12.00 Pick and pack −$1.18 Packaging −$0.50 Shipping label −$7.50 Card fee per order −$0.30 Refunds −$2.00 Card processing −$1.16 Contribution margin $15.36 2 declared kinds cost nothing on this option Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost. ## Free shipping is not a shipping cost It changes what the customer pays and leaves what you pay alone. A report that files free shipping under fulfilment cost will show costs rising when nothing about fulfilment changed, and will miss that revenue fell. ## Using it Price it as the revenue it gives up, per order, and compare that with the lift you expect. Where the full cost is too much, put it behind a threshold, limit it to bundles or subscriptions, or build part of it into the product price. On a subscription, decide separately for the first order and for renewals. ## Related - [Glossary **Glossary of offer economics** The terms behind offer profit, defined plainly with their formulas and a worked number: contribution margin, profit per visitor, break-even lift and more.](https://offersuite.io/glossary) - [Calculator **Free shipping threshold calculator** Price a free-shipping threshold with the shipping you give away on orders that already reach it, and the share of smaller orders that must top up to pay for it.](https://offersuite.io/calculators/free-shipping-threshold) - [Calculator **Offer option calculator: profit per visitor** Compare up to three offer options on profit per visitor, margin per order times conversion, and see the conversion lift each one needs to match the best.](https://offersuite.io/calculators/offer-option-profit-per-visitor) - [Glossary **Shipping revenue: definition, formula and example** What the customer pays for delivery, after any shipping discount and before tax. It is revenue of the order, separate from what the label costs.](https://offersuite.io/glossary/shipping-revenue) - [Glossary **Free-shipping threshold: definition and formula** The order value above which shipping is free. It costs the shipping revenue of every order already above it, and pays only if enough smaller orders top up.](https://offersuite.io/glossary/free-shipping-threshold) - [Glossary **Shipping cost: definition, formula and example** What the carrier charges you to deliver a parcel. A cost per parcel set by weight and distance, whatever the customer was charged for shipping.](https://offersuite.io/glossary/shipping-cost)