Shopify Discount Types Explained: The Complete Guide for Merchants

Shopify offers several ways to discount products, but most merchants only use basic percentage-off codes. You are leaving money on the table if you do not understand the full range of discount types and when to use each one.

This guide covers every discount type available to Shopify merchants, with real examples and the profit impact of each.

1. Percentage Off

How it works: Reduce the price by a percentage (e.g., 20% off). Best for: Store-wide sales, seasonal promotions, high-margin products. Example: 15% off an $80 product:

• Customer pays: $80 x 0.85 = $68
• If cost is $30: profit = $38, margin = 55.9%

Pros:

• Easy for customers to understand
• Scales fairly across products at different price points
• Works well with minimum purchase thresholds

Cons:

• On high-ticket items, the dollar amount can be very large
• Does not increase units per order

When to use: When you want a simple, broadly applicable promotion. Best on products with 50%+ margin where you can afford 15-25% off.

2. Fixed Amount Off

How it works: Reduce the price by a fixed dollar amount (e.g., $10 off). Best for: High-ticket items, minimum order thresholds, new customer acquisition. Example: $10 off a $200 product:

• Customer pays: $200 - $10 = $190
• If cost is $80: profit = $110, margin = 57.9%

Pros:

• "$10 off" feels more concrete than "5% off" to customers
• Predictable cost per redemption
• Great for setting minimum order thresholds ($10 off orders over $75)

Cons:

• On low-price items, the discount can exceed the product price
• Less flexible than percentage for mixed carts

When to use: On products over $100, or when you want to set a minimum order threshold to increase average order value.

3. BOGO (Buy One Get One)

How it works: Customer buys one unit, gets one free. Best for: Clearing inventory, low-cost items, increasing average order value. Example: BOGO on a $40 product with $12 cost:

• Customer pays $40 for 2 units
• Effective price per unit: $20
• Profit per unit: $20 - $12 = $8
• Margin: 40%

Pros:

• Very compelling offer for customers ("free" is powerful)
• Doubles the units per transaction
• Great for moving slow inventory

Cons:

• Equivalent to 50% off — the most aggressive standard discount
• Can destroy margins on high-cost products
• Customer may stock up and not return as quickly

When to use: On products with low cost relative to price (70%+ margin before discount), or when you need to clear inventory quickly.

> Deep dive: Not sure if BOGO is right for your store? Read our BOGO vs Percentage Off comparison to see which discount type protects your margins better.

4. Buy X Get Y (Volume Discount)

How it works: Customer buys X units, gets Y units free (e.g., Buy 3 Get 1 Free). Best for: Consumables, repeat-purchase products, increasing units per order. Example: Buy 3 Get 1 Free on a $30 product with $10 cost:

• Customer pays for 3, receives 4
• Effective price per unit: ($30 x 3) / 4 = $22.50
• Profit per unit: $22.50 - $10 = $12.50
• Total profit per transaction: $12.50 x 4 = $50
• Margin: 55.6%

Pros:

• Less aggressive than BOGO (25% off vs 50%)
• Moves more inventory per transaction
• Encourages bulk purchasing

Cons:

• More complex to set up natively in Shopify
• Customer must buy more units to qualify

When to use: On consumable products (supplements, skincare, food) where customers will use multiple units over time.

5. Free Shipping

How it works: Waive shipping costs for qualifying orders. Best for: Increasing average order value, reducing cart abandonment. Example: Free shipping on orders over $50 (shipping cost: $8):

• Customer saves $8 on shipping
• Your cost: $8 per qualifying order
• Effective discount: varies by order value ($8 off a $50 order = 16%)

Pros:

• #1 reason for cart abandonment is high shipping costs
• Encourages customers to add more items to reach the threshold
• Perceived value is high (customers overestimate shipping costs)

Cons:

• Direct cost to your bottom line
• Must set appropriate threshold to be profitable

When to use: When your average order value is close to your free shipping threshold. Set the threshold 15-20% above your current AOV.

6. Automatic Discounts vs Discount Codes

Shopify supports two delivery methods:

Discount codes — customer enters a code at checkout (e.g., SAVE20).

• Pros: Easy to create, trackable, can be shared selectively
• Cons: Requires customer action, lower redemption rate

Automatic discounts — applied automatically at checkout when conditions are met.

• Pros: Higher conversion, no code needed, better customer experience
• Cons: Cannot be "turned off" once customer sees them (requires app)

Shopify's native system supports basic automatic discounts. For advanced rules (BOGO, Buy X Get Y, tiered discounts), you need a discount app.

How to Choose the Right Discount Type

Not sure which discount type fits your store? Use this decision framework:

Step 1: Identify your goal

• Increase average order value → Free shipping with minimum threshold, Buy X Get Y
• Clear slow inventory → BOGO
• Attract new customers → Fixed amount off with first-purchase code
• Reward loyal customers → Percentage off with customer tag targeting

Step 2: Check your margins

Before running any discount, calculate your break-even point. If your normal margin is 40%, a 30% off promotion leaves you with only 14.3% margin. Use our discount margin calculator to verify profitability before publishing.

Step 3: Consider your product type

• High-ticket items ($100+) → Fixed amount off feels more concrete to customers
• Low-cost items (under $20) → Percentage off avoids giving away the entire product price
• Consumables → Buy X Get Y encourages stockpiling and repeat purchases
• Mixed catalog → Store-wide percentage off with minimum order threshold

Step 4: Choose automatic vs code-based

Automatic discounts convert better (no code entry needed) but cannot be targeted to specific audiences. If you want to offer different discounts to different customer segments, use discount codes with customer tag conditions.

Common Discount Mistakes to Avoid

Mistake 1: Stacking discounts unintentionally

Shopify allows multiple discount codes by default. A customer can apply a 20% off code AND a free shipping code, doubling your discount cost. Fix this in your Shopify settings by limiting discount code usage to one per order, or use an app that controls stacking rules.

Mistake 2: Running BOGO on high-cost products

BOGO is equivalent to 50% off. If your product costs $60 to make and sells for $100, BOGO gives you $10 profit per unit — barely above break-even. Always calculate the per-unit margin before launching a BOGO deal.

Mistake 3: Setting free shipping thresholds too high

If your average order value is $35 and you set free shipping at $75, most customers will not reach the threshold. The optimal threshold is 15-20% above your current AOV — enough to encourage adding one more item, but not so high that customers give up.

Mistake 4: Forgetting to set end dates

Discounts without end dates become permanent expectations. Customers who buy at 20% off will resist paying full price later. Always set a clear end date to create urgency and protect your long-term pricing power.

Compare All Discount Types Side by Side

The right choice depends on your specific price, cost, and business goals. Use our free Shopify Discount Calculator to see exactly how each discount type affects your profit.

Enter your numbers once and compare:

• Percentage Off
• Fixed Amount
• BOGO
• Buy X Get Y

See which option maximizes your margin in seconds.

Frequently Asked Questions

What is the best discount type for a new Shopify store?

Start with percentage off (10-15%) for your first promotion. It is easy to understand, works across all products, and lets you test how price-sensitive your customers are before trying more aggressive discount types like BOGO.

Can I combine multiple discount types in Shopify?

Shopify allows one discount code per order by default. To combine discount types (e.g., percentage off + free shipping), you need a discount app like DealCraft that supports discount stacking rules at the cart level.

Do automatic discounts work with Shopify Functions?

Yes. Automatic discounts powered by Shopify Functions calculate in under 50ms at checkout. DealCraft uses Shopify Functions for all discount types, including BOGO, Buy X Get Y, and free shipping — all applied automatically without customer input.

How do I prevent discount abuse?

Set usage limits per customer, require minimum order thresholds, and avoid stacking discounts. For advanced protection, use customer tag targeting to restrict discounts to specific segments (e.g., first-time buyers only).

Continue Learning

• How to Calculate Discount Margins Without Losing Money — the exact formula to ensure every promotion stays profitable
• BOGO vs Percentage Off: Which Makes You More Money? — head-to-head profit comparison with real numbers

Set Up Any Discount Type in Shopify

DealCraft supports all discount types with automatic checkout application powered by Shopify Functions:

• Percentage off, fixed amount, BOGO, Buy X Get Y
• Free shipping with minimum order thresholds
• Product and collection targeting
• Customer tag and tier-based rules
• Sub-50ms cart calculation (no checkout slowdown)

Install DealCraft free — no credit card required, free plan includes up to 3 discount rules.