Minimum Order Value: Should Your Online Shop Implement It?

As the operator of an online shop, you have most certainly asked yourself the following question: Should I offer a minimum order value in my online shop?

Perhaps you are still new to e-commerce or you just want a better understanding of the pros and cons of this strategy. Either way, you’re in the right place! We’ll break down the advantages and disadvantages of having a minimum order value and share some tips on how to integrate this strategy into your online shop.

Imagine: a customer orders a product of little value. Apart from this one product, nothing else is ordered. You order shipping for free, so the order will be sent out and completed quickly.

As the operator of the online shop, you now have to take care of shipping the product. For a single, low-priced product, the logistical effort can be quite large; especially since you will most likely not even make big money on this order due to the disproportionate effort and cost of shipping.

This can become a problem in the long run for operators of smaller online shops; especially when these small orders pile up.

Offering free shipping, even for smaller orders, can really cut into a shop’s profit margins.

For this reason, many shop owners implement a minimum order value in their shop. Many online retailers want to encourage their customers to order more before completing the checkout process. Typically, the minimum order value refers to the offer of free shipping.

This holds true not only for smaller online shops, but also well-known brands such as H&M, Flaconi, Globetrotter and Tchibo. They only offer free delivery for orders above a certain threshold.

First, let's take a look at the benefits of having a minimum order value in your online store.

Advantages of a minimum order value

One of the most important advantages of introducing a minimum order value is the average increase in the shopping cart value. In other words, many customers will add more products to their order to meet the specified value. The shop will tend to generate more sales as a result.

When customers who’ve added items to their shopping cart are still below the minimum order value, you can use upselling and cross-selling techniques to suggest related products for them to buy.

For example, if a customer wants to order a blanket in your shop, you could offer matching pillow cases or sheets in a pop-up or below the shopping cart. This strategy is called cross-selling.

With upselling, on the other hand, you offer customers a better, but slightly more expensive product (e.g. a higher quality blanket).

When customers are missing a small amount to reach the minimum order value in your online shop, they are more willing to add a more expensive or additional product to the order in order to reach the threshold.

Another benefit of the minimum order value is that it simplifies logistics and shipping.

After all, the effort involved in placing orders should be worthwhile for you and your company. This cannot always be guaranteed, especially when shipping very cheap items.

For this reason, smaller online shops in particular often decide to introduce a general minimum order value (e.g. orders can only be placed with a shopping cart value of 10 euros or more).

This ensures that only those orders that are worth the effort for you and your team are processed.

A minimum order value also ensures that your company is more sustainable because you tend to receive fewer small orders.

Fewer orders also mean that less packaging material is used and CO2 emissions are reduced.

Sustainability is also something that can positively shape your brand image. Studies show that the topic of sustainability is becoming more and more important to consumers in online retail.

Recommended reading:
What Steps Can Your Business Take to Go Green?

We have shown you the pros of a minimum order value. Next, we're going to look at the cons of minimum order values in online stores.

Disadvantages of a minimum order value

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As you may have guessed, a minimum order value can be a deterrent to potential customers.

Some visitors to your website will immediately leave the page as soon as they discover that it takes a certain value to order from your shop.

If customers think the set value is too high, it is likely that they will not buy anything from you at all.

A similar problem can arise if customers have explicitly searched for a certain product and only want to order this and nothing else.

It is quite possible that they would prefer to switch to your competition or a marketplace if they do not require a specific shopping cart value.

Conversely, you can assume that shopping cart abandonments will increase in your online shop.

Of course, there can also be other reasons that lead to increased shopping cart abandonment: for example, if the checkout does not work smoothly. Therefore, you should be paying attention if these numbers change dramatically after implementing a minimum order value on your website.

Minimum order value: yes or no?

Ultimately, it is up to you to decide whether you want to introduce a minimum order value in your online shop.

Is it important to you to only receive relevant orders that promise a good profit margin?

Then, you should limit orders in your online shop to a certain shopping cart value or a certain number of products. If, for example, the value of 10 euros is not reached, an order in your online shop is generally not possible.

Some food/grocery delivery services, for example, only offer delivery from a 25 euros order value or higher.

On the one hand, this limitation will most likely prevent some customers from ordering from you in the first place.

On the other hand, it can actually be worthwhile in the long term to accept smaller orders. Customer satisfaction increases; After all, customers who have already successfully ordered from you will happily buy from you again.

In addition, your online shop is open to a larger number of customers.

Do you want to save shipping costs, but at the same time give customers an incentive to buy more? Then it could make perfect sense for you to offer free delivery with a certain order value.

This means that customers pay the shipping costs themselves if they prefer to order only a few products of low value (usually between €3.90 and €6.90, depending on the shipping service). An order can therefore be placed despite its low value and still be profitable for you.

Tips for integrating the minimum order value in your online shop

So, you’ve weighed the pros and cons and have decided to introduce a minimum order value to your shop.

Here are a few tips:

1. What should the minimum order value be?

Make sure that the specified amount is not higher than the average order value in your online shop.

So, if your shop’s average order value is around €30, your minimum order value should not exceed €30.

For orientation: most online shops that offer free shipping grant this for an order value of over €20 or €25.

2. How can the minimum order value be integrated into my shop?

E-commerce providers such as WooCommerce, LightSpeed or Shopify will help you with the integration.

You can also add a minimum order value to your ads on Google and Google Shopping. You can adjust the necessary settings via the Google Merchant Center.

3. How should I draw attention to the minimum order value?

Inform your (potential) customers about the required minimum order amount by making it clearly visible on the website.

Visitors to your website should be able to see this information directly. It is therefore advisable to display the minimum order value at the top (e.g. above the navigation bar) on each of your pages and product pages. If the shopping part is static at the top of your website, this information can be placed nearby.

Another possibility would be to draw attention to this in a pop-up.

It's also worth reminding customers what amount is missing so that they can get free shipping. This could also be done with the help of a pop-up window or a dynamic display that visitors can always see on your website.

Especially if there is only a small difference of a few euros, you can easily convince customers to add another product to their shopping cart.

Conclusion

Having a minimum order value for your online shop is a decision you need to make based on many factors. Take your time, look at your numbers, do the math. Although there is a risk of losing some customers, there is also the possibility that your average order value goes up and that the business becomes more profitable.

This article was originally published and adapted from our German blog: Mindestbestellwert im E-Commerce: Sinnvoll für Ihren Online-Shop?

29/12/22