Ever wondered how to balance shipping costs and profitability while keeping customers happy?
Today, we’re sharing the key lessons learned from Mike Beckham running Simple Modern and how a bold change in shipping policy transformed their business.
Shipping can make or break your DTC business. Customers expect free or cheap shipping, but it eats into your margins.
With the example of Simple Modern all sales were on Amazon. They tried to move customers to their website by offering free accessories, but they still didn’t want to pay $5.99 in shipping on a $20 product.
Average order value (AOV) was just $22, and they knew they needed to fix it.
Simple Modern made a bold decision:
free shipping on orders over $10!
It boosted sales and AOV, but the problem was clear—they were losing money on every order.
Strategy was then shifted to free shipping on orders over $30, which slowed growth but created healthier profit margins.
Eventually increased the free-shipping threshold to $50, then $75, and saw margins improve as AOV grew.
But then something unexpected happened:
conversion rates dropped. Customers with smaller cart values were bouncing.
So Simple Modern took another bold step—lowering the free-shipping threshold back to $25.This move tripled conversion rates for customers with carts between $25 and $75, and our overall contribution profit skyrocketed.
The lesson?
(1)
You have to be willing to retest your assumptions.
Just because a higher free-shipping threshold worked once doesn’t mean it’s the best strategy forever.
(2)
Beware of using proxies like AOV as a stand-in for your business’s health.
At one point, Simple Modern needed AOV to go down for the business to grow.If you’re running a DTC brand, don’t get stuck optimizing proxies like AOV or shipping thresholds without testing your assumptions.
Leadership is about judgement.
Ultimately, a key member of the management team was willing to say, “I think we are getting this one wrong.”
Not an easy thing to do when all the previous data points in the other direction.
Your role as a leader is to leverage good judgment to determine where to test.
Recap:
If you’re running a DTC brand, don’t get stuck optimizing proxies like AOV or shipping thresholds without testing your assumptions.
The market changes, and your approach needs to change with it. Use good judgment, retest when things aren’t working, and be willing to adapt your strategy for sustainable growth.