Creative & Offers
How Much Discount Is Too Much for Ecommerce?
A discount becomes too large when the incremental sales and customer value it creates no longer compensate for the margin you give away.
That point is different for every product.
Start with contribution margin
Suppose a $100 product has $55 in variable costs.
Full-price contribution before advertising = $45.
At 20% off:
Revenue becomes $80.
If costs remain $55, contribution falls to $25.
You did not reduce profit by 20%. You reduced contribution before ads by roughly 44%.
Conversion must increase enough to compensate
The discount can still be profitable if it generates substantially more orders, increases AOV or acquires valuable repeat customers.
Watch customer training
Frequent discounts teach shoppers to delay purchases. Once customers expect 25% off every month, the “normal” price becomes less believable.
Use targeted discounts where possible
Rather than discounting every order, consider:
- bundles
- first-order incentives
- clearance
- customer-specific offers
- free-shipping thresholds
- gifts
Calculate before publishing the promotion
Discount depth should come from margin and expected lift, not because a competitor ran 30% off.
Need a second opinion on the offer?
If your Shopify store generates strong promotional revenue but very little profit, contact us. We can help calculate how much discount your economics can actually support.