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Shipping Strategy in Dropshipping: Free, Flat, or Pass-Through?
Shipping is the hidden profit killer in dropshipping. Customers hate paying for it — surveys consistently show 60–70% of shoppers abandon carts when hit with unexpected shipping fees — but absorbing it yourself silently eats 8–15% of revenue. The right shipping strategy is not "free shipping always" or "charge always." It is a deliberate decision tied to your margin, AOV, and customer psychology.
The Three Dropshipping Shipping Models
1. Free shipping (you absorb the cost). Highest conversion lift (10–25%), simplest UX, but eats margin. Best for products with gross margin above 50% and AOV above $30.
2. Flat-rate shipping (customer pays a fixed fee). Conversion lift of 5–10% over real-time rates. Customer feels the fee is fair. Best when your actual shipping cost varies wildly by region.
3. Pass-through / real-time rates. Customer pays exactly what the carrier charges. Lowest conversion, highest margin protection. Best for B2B or high-AOV stores where customers expect carrier rates.
The Free-Shipping Threshold Hack
Offering free shipping only above a threshold (e.g., "Free shipping on orders over $50") is the single most effective AOV-lifting tactic in ecommerce. Set the threshold at roughly 1.3× your current AOV — high enough to lift AOV, low enough to feel attainable. If your AOV is $40, set the threshold at $50–$55. Most customers will add a $10 item to qualify, increasing your profit per order.
Why ePacket's Death Changed Everything
Until 2020, ePacket — a subsidized shipping option from China Post — let dropshippers ship small parcels from China to the US for $1–$3 in 12–20 days. It was the foundation of the entire AliExpress dropshipping model. When ePacket was effectively killed by USPS political pressure and COVID-era disruptions, dropshippers had to choose between expensive faster shipping ($8–$15 via Yun Express, CJPacket, or 4PX) or slow cheap shipping ($2–$4 via standard China Post, 25–45 days). Most profitable stores now either source from US-based warehouses (Zendia, Spocket, Supliful) or absorb the higher shipping cost and price accordingly.