The five common ecommerce shipping strategies (free, flat rate, threshold, real-time carrier rates and local pickup), how to price each one against your margins, and a step-by-step way to pick and run yours.
A good ecommerce shipping strategy is a pricing decision, not a logistics one. You pick how the customer pays for delivery (free, flat, threshold, live rates or pickup), then make sure that choice still leaves margin on a typical order. Most small stores do best with a free shipping threshold set slightly above their average order value, backed by a flat rate below it.
The rest of this guide walks through each strategy, the numbers you need before choosing, and how to run it week to week.
| Strategy | How the customer sees it | Best for | Main risk |
|---|---|---|---|
| Free shipping on everything | "Free shipping" on every product | High-margin, lightweight products | Margin erosion on small orders |
| Flat rate | One fixed fee, e.g. per order | Products of similar size and weight | Undercharging on heavy or far orders |
| Free over a threshold | "Free shipping over X" | Most small and mid-size stores | Threshold set too low or too high |
| Real-time carrier rates | Calculated at checkout | Heavy, bulky or varied products | Sticker shock at checkout |
| Local pickup or delivery | "Pick up in store" or a local zone | Stores with a physical location | Only works for nearby buyers |
These are not exclusive. A common and sensible setup is threshold free shipping for standard orders, real-time rates for oversized items, and local pickup for customers in your area.
You cannot pick a shipping strategy well without these figures. All of them come from your own order history and your carrier or shipping app account.
If you do not have 60 days of orders yet, weigh and measure your top five products packed in their shipping boxes, then get quotes for three typical destinations (close, mid-distance, far) from your carrier or a shipping app. That gives you a realistic range.
Carrier pricing is based on more than weight. Knowing the drivers lets you cut cost without changing strategy at all.
Say a store sells candles. Over the last 90 days:
Option A, free shipping on everything. Each average order drops from $25 margin to about $15.30. Survivable, but a single $18 candle order would earn about $10.80 margin and cost $9.70 to ship and pack, leaving almost nothing. Free on everything is risky here.
Option B, flat $6 shipping. The store eats $3.70 per order. Simple to explain, but customers increasingly expect free delivery at some level.
Option C, free over $50, $6 below. $50 is about 19% above the $42 AOV, which gives shoppers a reachable reason to add a second item. At $50 the margin is roughly $30, and after $9.70 of shipping and packing the order still clears about $20. Below $50, the $6 charge covers most of the cost. This is the pick.
Option D, real-time rates. Accurate, but candles are similar in weight, so the added complexity buys little.
Run the same arithmetic on your own numbers. The goal is that an order sitting exactly at your threshold is still clearly profitable.
| Model | You handle | Fits when |
|---|---|---|
| Self-fulfilment | Storage, packing, labels, drop-off or pickup | Low to moderate volume, custom or fragile goods |
| 3PL (third-party logistics) | Sending inventory to the warehouse | Volume is steady and packing time is limiting growth |
| Dropshipping | Nothing physical; the supplier ships | You accept less control over packaging and speed |
| Print on demand | Designs only | Apparel, prints, mugs and similar |
Self-fulfilment is fine far longer than many people assume. The signal to move to a 3PL is usually that packing orders is eating the hours you need for marketing and product, not a specific order count. When you compare 3PLs, ask for their receiving, storage, pick-and-pack and minimum monthly fees in writing, since these structures vary a lot.
You need three things working together:
For international orders, you also need correct customs forms and HS (Harmonized System) codes for your products, and you should decide whether duties are paid by you at checkout (DDP, delivered duty paid) or by the customer on arrival (DDU/DAP). Surprise duty bills at the door are a common cause of refused parcels and bad reviews.
Your strategy only works if customers understand it before checkout. Unexpected extra costs at checkout are one of the most commonly cited reasons shoppers abandon carts.
These are also on-page trust signals. If you are working through the rest of your product pages, the on-page SEO checklist covers titles, descriptions and structure.
Shipping strategy is not a set-and-forget setting. Track these monthly:
Re-run the Step 3 arithmetic whenever carriers publish their annual rate changes. That is the moment when thresholds that used to work quietly start losing money.
Every strategy above depends on a storefront that can express it: threshold messages, clear policy pages, product-level delivery estimates. We.Inc builds online stores from a plain description, so you can say "free shipping over $50, flat $6 below, show a progress bar in the cart" and then adjust the result in the visual or code editor, with hosting and SSL included. If you are still deciding where to sell, read selling on marketplaces vs your own store first.
For most small stores with a narrow range of product sizes, a free shipping threshold set a little above the current average order value, with a flat rate below it, is the easiest to run and to explain. Stores with heavy or oddly sized products usually do better with real-time carrier rates so they never undercharge.
Pull your average order value from the last 60 to 90 days of orders, then set the threshold roughly 15 to 30 percent above it so customers have a reason to add one more item. Check that the gross margin on an order at the threshold still covers your average label cost plus packaging.
It works well when products are similar in weight and your prices can absorb the cost without looking out of line with competitors. It works badly when you sell a mix of light and heavy items, because the light items end up overpriced to subsidise the heavy ones.
Real-time rates are pulled at checkout from a carrier or a shipping app, based on the package weight, dimensions and destination. The customer pays what the label will actually cost (sometimes plus a handling amount), which protects your margin but can show high numbers for remote addresses.
At least whenever carriers announce their yearly rate changes, and any time your average order value or product mix shifts noticeably. A quarterly look at shipping cost as a share of revenue catches drift early.
How we research, test and update this page: our editorial policy. We.Inc is our own product.
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