Are Free Shipping & Discounts the Silver Bullet for Cart Abandonment?
- Free shipping and discounts are powerful conversion tools, but must be used strategically to maintain margins.
- A/B testing helps identify what boosts conversions and retention while maintaining profitability.
- The key to sustainable success is balancing short-term sales boosts with long-term brand value, ensuring customers don’t become conditioned to expect constant discounts.
Cart abandonment is a major revenue leak in ecommerce, with rates averaging between 60-80% across industries.
Free shipping and discounts are two of the most common tactics brands use to combat this, but they come with trade-offs.
Used wisely, these strategies can be supremely effective at reducing cart abandonment. But they come at a cost – reducing profits, devaluing your brand, and training customers to always expect discounts.
In this guide, we’ll break down when, how, and why to leverage free shipping and discounts effectively, without destroying your bottom line.
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Why Shoppers Abandon Carts
The most common reasons for abandoned carts include:
- High shipping costs – The #1 reason customers leave without buying.
- Unexpected total price (taxes, fees, shipping) – Sticker shock kills conversions.
- Slow delivery times – Customers want speed and convenience.
- Complicated checkout process – Every additional step leads to drop-off.
- Lack of payment options or incentives – No flexibility, no sale.
Shipping costs and other price-related factors are the number one reason shoppers abandon carts.
Nearly 48% of U.S. online shoppers who were poised to buy have abandoned a cart due to high extra costs like shipping, taxes, or fees.
This far exceeds other reasons; for comparison, the next biggest cause is being forced to create an account (around 26%).
Read more: Optimizing the Checkout Process to Reduce Abandoned Carts
The Psychology & Economics of Free Shipping and Discounts
Offering free shipping or discounts isn’t just a pricing tactic or a random hack.
It’s a psychological and economic trigger that influences consumer behavior in a powerful way. The psychology behind free shipping and discounts is about removing friction (cost, pain, uncertainty) and increasing positive emotions (gain, relief, urgency).
Free shipping eliminates a major purchasing hurdle, while discounts provide an immediate reward that reduces hesitation.
Here are some specific examples of how free shipping and discounts play on psychological principles to increase conversions.
The “Zero Price” Effect: Why Free Wins Every Time
Behavioral economists have shown that consumers disproportionately value anything labeled “free.”
In Dan Ariely’s book Predictably Irrational, he displayed how when given the choice between a free Hershey’s Kiss and a superior chocolate at a low price, most people irrationally chose the free option.
In ecommerce, free shipping is not just a cost reduction, it’s a perceived bonus that excites shoppers and nudges them to complete their purchase.
This is why customers often prefer saving $6.99 on shipping over getting $10 off a product price – it feels like a better deal, even when it isn’t.
Removing the “Pain of Paying” at Checkout
Shipping fees feel like a waste to consumers – an added cost with no tangible benefit.
This taps into behavioral economics’ Pain of Paying concept: when a new cost appears late in the checkout process, it triggers friction and discomfort, increasing the chance of abandonment.
Free shipping eliminates this emotional pain, making checkout feel seamless. Shoppers also experience a sense of relief when seeing a $0 shipping charge, reinforcing a positive purchase decision.
Loss Aversion: Framing Matters More Than Math
People hate losses more than they enjoy gains.
A shipping charge feels like a loss, while a discount feels like a win, even if they result in the same final price.
This is why free shipping often outperforms discounting in A/B tests: psychologically, removing a negative (shipping cost) is more powerful than adding a positive (discount).
(The same logic applies to free returns – customers feel more comfortable buying if they know they won’t “lose” money if the product doesn’t work out.)
The Reciprocity Principle: Giving to Get
Consumers are more likely to complete a purchase when they feel the brand has given them something first (reciprocity).
Free shipping or a discount signals generosity, creating goodwill that makes customers feel obligated to follow through on their end (buying).
This is even stronger when combined with transparency: brands that display free shipping or discounts upfront build trust, reducing last-minute checkout friction.
Urgency & Scarcity: The FOMO Effect of Discounts
Discounts work best when they create a sense of urgency.
A limited-time coupon or countdown timer plays on loss aversion – shoppers don’t want to “miss out” on savings.
This is why abandoned cart emails often feature expiring discount codes, as the fear of missing out pushes hesitant buyers to act before the deal disappears.
When & How to Use Free Shipping Strategically
Free shipping has become an expectation for many online shoppers, with studies showing that 66% of consumers expect free shipping on every purchase.
However, offering it indiscriminately can quickly erode profits.
Smart operators leverage tactics like free shipping and discounts strategically, offering free shipping above certain thresholds, using discounts selectively, and reinforcing urgency when needed.
The goal isn’t just to get the sale. It’s to increase AOV and maximize lifetime value in a way that keeps the business profitable.
Here's how to implement free shipping strategically, and sustainably:
Winning Free Shipping Strategies (The Operator's Playbook)
Threshold-Based Free Shipping
- Implementation Guide:
- Calculate your current Average Order Value (AOV)
- Set the free shipping threshold 15-30% above your AOV
- Example: If your AOV is $40, set free shipping at $50
- Best Practices:
- Display the threshold prominently throughout the shopping experience
- Show a progress bar: "Add $12 more for free shipping!"
- A/B test different thresholds to find the sweet spot
Member-Exclusive Free Shipping
- Implementation Steps:
- Create a simple sign-up process (email + password)
- Offer immediate free shipping upon membership
- Consider tiered membership levels with different benefits
- Key Benefits:
- Builds customer loyalty
- Captures valuable customer data
- Creates a competitive moat
- Cost Control:
- Limit to domestic shipping initially
- Set minimum order values for premium shipping options
Bundled Free Shipping
- Strategy Implementation:
- Identify complementary products
- Create pre-made bundles with higher margins
- Offer free shipping exclusively on bundles
- Margin Protection:
- Include at least one high-margin item in each bundle
- Set minimum bundle values to cover shipping costs
- Use psychological pricing (e.g., $99 instead of $100)
Limited-Time Free Shipping
- Execution Framework:
- Plan campaigns around key shopping dates
- Create genuine urgency with clear deadlines
- Use email marketing to announce promotions
- Campaign Structure:
- Duration: 24-72 hours maximum
- Clear start and end times
- Countdown timers on site
- Frequency Guidelines:
- Maximum once per month
- Align with inventory cycles
- Avoid holiday season overlap
First-Time Buyer Free Shipping
- Implementation Strategy:
- Use pop-ups for email capture
- Apply automatically at checkout for new customers
- Set reasonable restrictions (e.g., minimum $25 order)
- Success Metrics:
- Track new customer acquisition cost
- Monitor repeat purchase rate
- Compare against other acquisition channels
Downsides of Free Shipping (& How to Counter Them)
Nothing in life is actually free. There’s a cost somewhere – and often, with free shipping offers, that cost is to the brand.
Free shipping can eat into your margins, and increase your logistics costs to the point where the increase in conversions is not worth it.
That’s why it’s important to test, and see the ultimate impact on your bottom line.
Many brands find that, while conversions are lower without free shipping, profits are higher.
This is something you’ll want to experiment with for yourself, to find the ideal point where conversions and margins meet.
Here are some additional tips to follow to make sure your free shipping policy actually adds value for your business.
- Set a threshold above your average AOV, to ensure you’re encouraging customers to spend more.
- Offer region-specific free shipping (e.g., domestic only) to minimize the logistics cost.
- A/B test against other incentives to see what has the best impact on conversions.
Discounting Done Right: Driving Conversions Without Devaluing Your Brand
Discounting is an effective way to drive immediate sales, but overuse can train customers to wait for deals, reducing long-term profitability.
Constant discounts can also affect customers’ perception of your brand. If your products are always on special, you start to look like a discount brand – making it hard to sell shoppers on higher-priced products.
That’s why you always want to use discounts strategically.
A few common ways to use discounts include:
- Welcome Discounts (First Purchase Incentive) – Hook first-time buyers with a small incentive.
- Exit-Intent Offers – Trigger a discount pop-up when users try to leave.
- Tiered Discounts – "Spend $75, get 10% off. Spend $150, get 20% off." to increase AOV.
- Volume Discounts – "Buy More, Save More" structures that improve unit economics.
- Discounts for Non-Discount Buyers – Personalize offers for high-LTV customers.
Discounts are commonly used to reduce (or recover) abandoned carts. A discount is often just the push a customer needs to get over the little bit of doubt that was stopping them from going through with their purchase (especially when it’s paired with a little FOMO).
Yet if you’re too quick on the trigger, you can end up providing discounts to people who otherwise would have paid full price, costing you money.
Exit intent popups with a discount will likely reduce abandoned carts – but you'll also catch a lot of shoppers that were about to pay full price already.
Similarly, with abandoned cart notifications and emails, coming right in with a discount may not be the best approach.
A simpler reminder, coupled with some FOMO (Complete Your Purchase Before Stock Runs Out!) may be enough to recover the cart, without discounting the product.
You could then follow up with a discount on the 2nd/3rd message of your sequence, for those who still haven’t converted.
Final Verdict: The Smart Operator’s Playbook on Free Shipping & Discounts
Financial incentives like free shipping and discounts are among the most powerful ways to increase conversions and reduce abandoned carts.
But they come at a cost. So it’s important to use these incentives sparingly, and not overdo it.
Here are a few things to take away:
- Free shipping and discounts are tools, not crutches. Use them strategically.
- Test and validate. What works for one brand may not work for another.
- Think long-term. Discounts drive short-term sales, but LTV drives sustainable growth.
- The Ultimate Goal: Reduce cart abandonment while increasing AOV and retention.
Operators who get this balance right win higher conversions, higher margins, and happier customers. Execute wisely!
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Social Proof: The Expectation of Free Shipping
As free shipping becomes the norm (with 75% of U.S. retailers offering it), customers expect it.
Charging for shipping can make a brand feel like an outlier in a bad way, prompting customers to abandon their cart and look elsewhere.
Even if your base price is lower, a competitor with free shipping might feel like the better deal. Aligning with industry standards can prevent this perception gap.