I had a call last week with a store owner who was absolutely glowing. I mean, genuinely lit up the room. I always like to start my calls with a win and I could see that she was just itching to tell me hers. She had been having the kind of six weeks that every retailer dreams about. Orders were going up every single week. The cash was rolling in and she wanted to tell me about it before we'd even said hello properly. I found the fix, she blurted out. Now, for months, she had been watching people get all the way to checkout on her website and just disappear. She tried a few things like a banner across the top of the site that had her free shipping over $1.49. That did help a little bit, but her threshold was high enough that most single item shoppers just never got near it. And so she'd also gone back and looked at absorbing that shipping cost into her product prices, but she decided to back away from that. because she didn't want to look like the most expensive person in her category.

Now, she genuinely believed that her shipping cost was the key thing stopping her from getting sales. Now, most of her items went out as parcels because they were $149 orders, but there was a range of her products that could be shipped as a letter. And so she decided to add a cheaper shipping option at checkout. She told me exactly what it cost her, exactly what she charged. and exactly what that left her with on every single transaction. My heart absolutely sings when you back your decisions with data. Now, this wasn't a case of someone just throwing an idea of changing the shipping at the wall and hoping. She had thought it through. And the moment it went live, more people started buying. Her Shopify app was kachinging constantly. She said it was like, when those slot machines go off when you hit the jackpot. She said her Shopify app was just going ka-ching, ka-ching, ka-ching, ka-ching all day.

Hey there, and welcome to the Bringing Business to Retail podcast, where we talk all about ways to make more money and grow your retail e-commerce business. So here it is. The Shopify app is ka-ching, ka-ching, ka-chinging, just like a slot machine in a casino. And she would come in every morning. She would see it on her dashboard. There were more orders overnight than she had had in months. They were all sitting there waiting for her like a scoreboard. She was finally winning. And on paper, this was brilliant. She charges just under $7 for the letter option domestically, $6.99. And it costs her somewhere between $3 and $4 in actual stamps, of course, depending on the weight. So worst case, on every single one of those orders, she is pocketing $3 just for packing the order. Best case, more than that. She told me straight up, Sal, I am not losing any money on this.

I checked. And she was right. She wasn't losing money on the shipping at all. That specific line item was straight up profit every time, no exceptions. She wanted to know what I thought. Should she keep going with it? Should she maybe even lean into it further because she was making so much money? Should she maybe lower the threshold? Like should she turn it to just $6.99? I let her have the moment. I didn't jump in with anything because on paper, from where she was sitting, she was completely right. Something had genuinely changed and the question was never whether it changed. The question that I always have, because my brain always is looking at, is this making us the most amount of money? The question was whether the thing that changed was the thing that she thought it was. So I asked her one question before we went any further. has your average order value moved since you added this? She paused and then she said, yeah, it has dropped. I knew you were going to ask me that.

I said, all right. So what has it dropped by? So previous to the change in the shipping, her average order value was around about $150 to $180, just depending on the season. Now that's probably because her free shipping threshold kicked in at $149. So people were shopping their way up. to the free shipping. Now, I don't know about you, but I am that person. I will be the person who sits there and says, is shipping $20? No, I will just add myself a $20 item, even if I don't need it. So I get to that free shipping threshold. So her average order was before this between $150 and $180. Now it was sitting at $120. So here's why this is important. Here's why it's more important than the math that she had already spent the time to work out. Before she added that cheaper letter mail option if someone wanted a piece of fabric for a project they would often need more than one piece or more than one thing, a meter of this, a half a meter of that, some buttons, some notions. So rather than paying for shipping twice or paying $20 for shipping, they would just wait and they would add it all to the cart. They would keep adding accessories and all those other items until they would get to the free shipping. I mean, this is what we do as humans, right? Check out once everything arrives. So that free shipping threshold wasn't just a number on the banner. it was doing a job. It was holding her order sizes to a specific level.

Now, the moment that she introduced an option that made shipping cheaper, that job that that threshold was doing, it just disappeared. So now somebody who was finishing a project could grab that half a meter that they needed today for just $7 in shipping, $6.99, instead of waiting until they had a full cart's worth to justify either the $15 or $20 shipping cost. or waiting to add enough to cart to hit that free threshold.

If I try and say free threshold too quickly, I just can't say it, my friends. So she had handed her customers what I like to call a get out of jail free card. So for a few dollars, they could break this really big order that they used to do into much smaller orders anytime they wanted. And it didn't have that pressure to add all of those extra items that would get them to the free shipping amount. So was it a good decision or not? Well, this is what we had to work out. Were people still buying the same amount, but in smaller batches, or were they buying less in total because they weren't putting all those ancillary things in, the buttons, the zippers, the notions, to get them to the free shipping threshold? That is the actual question sitting underneath the shipping question. And you can't answer it by looking at the price of a stamp. It's not really a shipping question at all. It's a question about what is happening in her business at that customer level over a period of time, not at the order level on one single day. So here's the thing about testing anything in your business, whether we're talking about shipping or anything else, you have to know what you're testing for before you launch it. Not once the results are coming in and you're sitting in front of you and you're doing a debrief. and then you skew them to get the answer that you want. So she launched a cheaper shipping option to get more orders. And she watched the orders go up because the order count was the number that was really easy for her to measure. I mean, it's really obvious. We get the dopamine hit when the Shopify app goes ka-ching, ka-ching, ka-ching. But order count wasn't going to answer the actual question. I mean, of course, orders are going to go up. She made buying smaller amounts. much easier. And something easier will probably mean you get more of it. So that's not a result. That's just a logical explanation of what happens when you remove a barrier.

So the number that she actually needed to be watching was a completely different one. It was over the following few months. Is this customer spending more with me in total or less? So I said all of this to her on the call and I could hear her going quiet on the other end. She... she will always just take a moment, absorb everything, take it in, and then she'll ask questions about what this means for her business. So taking that threshold away, you take away the thing that had been bundling those customers' purchases together into fewer, bigger orders. So that same customer, if they are now spending roughly the same amount of money over, say, a quarter now does it over maybe four or five separate transactions instead of one. Not a problem, right? We are still getting the same amount of money, but here is where you need to look deeper. If someone used to buy 10 things from you in one order and now buys those same 10 things across five orders over, let's say, a quarter, you're now paying more in packaging, your labor costs increase, you're also holding five of those things on your shelf. for longer than you used to, waiting for the rest of that order to eventually get bought. And you know, stock sitting on a shelf is not neutral. It costs you rent, it costs you insurance, it costs you interest, it's the opportunity cost of the fact that you can't put that money into stock that sells. Slower stock turnover is an expense. And every single day that your stock sits there, instead of turning it into cash that you can then use to buy fresh stock, is taking money away from you. And this is the part that made her stop and think. More than the packaging cost, more than the wages, because you will have to pack more orders. You can see those things.

You don't always see stock sitting on a shelf for an extra two, three, four, six weeks. It doesn't really stand out. It's something you have to be doing stock take on. You have to be running reports on to see. It just sits there and it ties up your cash that you could be using. And the only place that's going to show up on is a stock turnover report, which let's be honest, how many of you are actually doing those on a weekly basis? Some of those customers who are finishing a small project today do come back and order a bigger order later. I mean, repeat customers are the majority of her business. And when we looked closer, the stock that she was sitting on was actually moving faster in terms of units, even if each individual order was smaller. So then we have to come back and ask the question, is the shipping option costing her money in a way that doesn't easily show up on a report? or Is it just changing the shape of the way her existing customers behave in a way that roughly ends up the same over time?

Honestly, I don't know yet. Not enough time has passed to get a really good picture. But when we got into it a little bit deeper, I said to her, do you want more orders or do you want more profit? Because those are two different things. And she did not hesitate. She came back instantly and she said, I need more profit. Okay, which meant we had to go back over these numbers and actually work out whether the profit had followed those new orders or not. We had to look at all of those things, the amount of time it was taking to pick and pack, the packaging costs, the back to the average order value, the stock turnover rates, all of those things affect profit. So there's a difference when we have a goal of more profit versus more sales. And that was what we needed to take into account. Originally, she started off looking for more sales. Then she realized what she actually wanted was more profit.

So that surface problem that she did solve when we talked about checkout friction, the cheaper shipping, that resulted in more orders. Problem solved. But that was never the issue that she was trying to solve. The checkout wasn't broken to begin with. What she had actually done without meaning to you was to remove that one piece of natural pressure that had been keeping her order sizes relatively big, over $150, and ended up reducing her profitability. Because now they were packing more orders, she needed more staff, and all of that was happening for less money. So she hadn't fixed the thing she wanted to fix. She just traded one problem for potentially a completely different one that was less visible. And during all of this, it felt like... progress because the visible numbers moved. So the lesson I want you to take away from this episode is really, really simple. It's not about whether you should reduce or increase your shipping rate or your free shipping threshold or whether, well, maybe it is about making sure you check your stock turnover rate, but it's that we need to know the outcome that we want. In this case, it was profit, not orders, before we can come up with a solution. Because you can be doing more orders, you can have more transactions coming through, you can be busier, you can watch that dashboard number tick up every week and you can get addicted to the Shopify ka-ching. But if you don't know if you're better off or worse off than before you made the change that caused it, then where are you? So speaking of money, Q4, the peak season for most of you is almost upon us. I know you're like, Sal, it's July. But this is the time that you need to be prepping and understanding. what is happening in your business so that you can maximize the money that you make during that peak season. And so I have put together a series of free masterclasses this quarter, Q3, all focused on prepping you for a profitable peak season.

So this month on the 30th of July, where I see money being left on the table, I'm going to be spilling the tea on how many retailers leave tens of thousands of dollars on the table during Q4 and how you can stop that from happening. In our second masterclass in August, we will dig up how to work out which products you should be buying, how much to buy, when you need them, and how you're going to sell it. And in our third masterclass, you will uncover how to get more people buying before Black Friday and Christmas so that your Q4 sales are not entirely reliant on discounts. Now, this series is completely free. You can register for one, you can register for two, you can register for all of them. And you can do so over at salenaknight.com/q3. Stop leaving money on the table this peak season by knowing what to spend, what to stock, and how to build demand before everybody else does.

Register now over at salenaknight.com/q3 and I hope to see you there.

So that's a wrap. I'd love to hear what insight you've gotten from this episode and how you're going to put it into action. If you're a social kind of person, follow me at The Selenaknight. And make sure to leave a comment and let me know. And if this episode made you think a little bit differently or gave you some inspiration or perhaps gave you the kick that you needed to take action, then please take a couple of minutes to leave me a review on your platform of choice. Because the more reviews the show gets, the more independent retail and e-commerce stores just like yours that we can help to scale. And when that happens, it's a win for you.