Shipping Pass-Through Calculator
Should you offer Free Shipping or charge for it? Analyze the trade-off between margin erosion (absorbing cost) and conversion rate drop (passing cost).
Unit Economics
of Product Price
Total Profit vs Strategy
Policy Recommendation
Winner: 50% Passed
Profit Maximizer
The 50% Passed strategy yields the highest total profit per 1000 visitors ($353).
Conversion Impact
Compared to Free Shipping, passing 100% of cost drops conversion from 2% to 1.36%.
Cost Reality
If you offer Free Shipping, you lose $8 of margin per order. Can you afford that?
Execution Steps
Enter your Product Price and Product Margin ($).
Enter the Actual Cost to ship the item.
Set your Baseline Conversion Rate (assuming Free Shipping).
The chart predicts the 'Profit Sweet Spot' by balancing lower margins against higher volume.
Pro Strategy
- Test a 'Flat Rate' strategy (e.g. $5 shipping). This usually corresponds to the ~50% pass-through scenario and often strikes the best balance.
- Use Free Shipping as a threshold incentive (Spend $50 to get Free Ship) rather than a blanket policy.
- Bake 50% of the shipping cost into the product price. Customers prefer $55 + Free Shipping over $50 + $5 Shipping.
Core Concepts
Pass-Through Rate
The percentage of the shipping cost charged to the customer. 0% = Free Shipping. 100% = Customer pays full rate.
Cart Abandonment
Unexpected shipping costs are the #1 reason for cart abandonment. High pass-through rates kill conversion.
Profit per Visitor
The ultimate metric. High conversion with low margin (Free Ship) might yield less total profit than lower conversion with high margin (Paid Ship).
What is Shipping Pass-Through Calculator?
This model simulates the elasticity of demand relative to shipping costs. It assumes that shipping fees are 'friction' that reduces conversion rate. It calculates the Total Contribution Profit for a cohort of traffic to find the optimal policy.
Best For
- • Setting up shipping profiles in Shopify.
- • Planning a promotion.
- • Analyzing low margin SKUs.
Limitations
- • Assumes linear relationship between shipping cost and conversion drop.
- • Does not account for AOV changes (thresholds).
Alternative Methods
Free Shipping Threshold
Optimizing for basket size rather than single unit conversion.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
Furniture Retailer
Shipping heavy chairs cost $50.
Tested Free Ship (Price $250) vs $50 Ship (Price $200).
Fashion Brand
High return rates.
Charged $5 shipping but offered Free Returns.