Free shipping: what it really costs you and when it pays off
«Free shipping» sells. But shipping is never free: someone pays for it, and if it is not the customer, it is you, out of your margin. The question is not whether to offer it, but how much it costs you on each order and how many extra sales you need to make up for it. Here is how to measure it, with three ways of doing it and their numbers.
1. What you charge versus what you pay
Every order has two different shipping figures:
- What you charge the customer for shipping. It is part of the sale price: the Spanish VAT Act includes in the taxable amount of the sale the costs of commissions, carriage and transport (article 78.Dos.1.º). So it carries the VAT of what you sell, and what you keep is that amount excluding VAT. If you charge €4.95 at 21%, you keep €4.09.
- What the carrier charges you. It is an expense, excluding VAT if you can deduct it. Whether its invoice carries VAT depends on the service: we explain it in VAT on shipping invoices.
The difference between the two, order by order, is what shipping costs you (or leaves you). To know it, you need the real cost of each shipment, not an average from memory: the carrier's invoice, split across the orders it covers.
2. An example order, with and without free shipping
The figures are examples. They are not real rates or fees from any company. A product at €29.90 including VAT (€24.71 excluding VAT) that costs you €9.00, a shipment the carrier charges at €4.90 and a gateway fee of €0.90.
| Item | You charge shipping (€4.95) | Free shipping |
|---|---|---|
| Product excluding VAT | €24.71 | €24.71 |
| Shipping charged excluding VAT | €4.09 | €0.00 |
| Product cost | − €9.00 | − €9.00 |
| Shipping you pay | − €4.90 | − €4.90 |
| Gateway fee | − €0.90 | − €0.90 |
| What you keep from the order | €14.00 | €9.91 |
Free shipping takes €4.09 per order off you. It does not sound like much, but it is almost 30% of what the order used to leave you.
3. How many extra sales you need
With 100 orders a month charging for shipping, you keep €1,400.00 before ads and fixed costs. With free shipping, each order leaves €9.91, so to reach the same amount you need €1,400.00 ÷ €9.91 = 141.27, that is, 142 orders: 42% more sales.
That is the question you have to answer with your own data: whether free shipping brings you that many extra orders. If it brings fewer, you lose money even though you sell more.
4. Two other ways to do it
Raise the price to include shipping. If the product costs €34.90 with free shipping instead of €29.90, the sale excluding VAT is €28.84, and the order leaves you €14.04: practically the same as charging shipping separately. The customer sees «free shipping», but pays for it in the price.
Free shipping above a threshold. If you offer free shipping from €50.00 and the customer takes two units (€59.80, €49.42 excluding VAT), with slightly more expensive shipping at €5.40 and a fee of €1.80, the order leaves you €24.22. Shipping is free for the customer, but a bigger order pays for it. The threshold works if it sits above your average order, just enough for adding something to be worth it.
| Option | What you keep from the order |
|---|---|
| You charge shipping separately | €14.00 |
| Plain free shipping | €9.91 |
| Free shipping with the price raised to €34.90 | €14.04 |
| Free shipping from €50.00, two-unit order | €24.22 |
5. What to keep in mind
- Look at the real cost of each shipment, not the rate on the carrier's website: with weight, size, destination and surcharges.
- Returns get shipped too. If you pay the return shipping, add it to the cost of the product that comes back.
- An order with no shipping cost recorded misleads you: it looks like it earns more than it does.
- The gateway fee changes with the amount. In the examples we keep it fixed to see only the effect of shipping.
Work out one of your orders in the order profit calculator, with and without the shipping you charge. And if you want to see each product's margin with shipping spread across it, we explain it in the real margin per product.
Sources
- BOE · Law 37/1992 on Value Added Tax (articles 78 and 90) · checked on 27/09/2026
- Spanish Tax Agency (AEAT) · VAT rates (in Spanish) · checked on 27/09/2026