If I offer free shipping and absorb the courier cost myself, how many more orders do I need to break even?
Add the shipping you will pay to the variable cost of each order and run the break-even twice, once without it and once with it. The difference is how many extra orders the offer needs. In the example below, 25 of shipping moves break-even from 134 orders to 229: 95 extra orders every month.
Where shipping goes in the calculation
Free shipping does not touch your rent or store plan, so fixed costs stay the same. What changes is that every order now costs you the courier charge on top of product and packaging. It belongs in the variable cost field of the Break-even calculator, not in fixed costs.
The comparison in numbers
- Customer pays shipping: fixed costs 8,000, order price 150, variable cost 90. Contribution 60; exact break-even 133.33, rounded up to 134 orders.
- You pay shipping: same inputs with 25 added to the variable cost, making it 115. Contribution 35, contribution margin ratio 23.33%, exact break-even 228.57, rounded up to 229 orders.
- The difference: 229 − 134 = 95 extra orders a month just to cover the shipping you now carry.
Why the jump is bigger than it looks
25 looks small next to a price of 150, about a sixth of it. But it does not come out of the price; it comes out of the contribution alone, which was 60. You have given up more than 40% of the contribution, so it takes many more orders to collect the same fixed amount. The thinner your margin, the harder free shipping hits.
None of this means free shipping is a bad idea. It may bring in more than 95 extra orders, or it may not. The calculator cannot predict customer behaviour, but it gives you the number the offer has to beat to avoid losing money.
Ways to soften the hit
- Build the shipping into the price: at 175 with a cost of 115, the contribution is back to 60 and break-even returns to 134 orders. Test it with the Selling-price calculator.
- Build in part of it: at 165, the contribution is 50 and break-even is 160 orders, a middle ground between 134 and 229.
- Make shipping free only above a minimum basket, so the offer lands on larger orders that can carry it.
- Check the parcel's volumetric weight with the Volumetric shipping-weight calculator; a large, light box can cost more than you expect.
Common questions
Shipping varies by city. Which figure do I enter?
Use the average you actually paid per order last month. The calculator takes a single variable cost.
Does the tool estimate how many orders the offer will bring?
No. It shows the level orders must reach, not how many will arrive.
Should the unit be an order or an item?
Shipping is charged per order, so make the order, at its average value, the unit for this calculation.