What Is a Discount? How It Cuts Your Profit

What 10% Off Really Takes From Your Profit

A discount comes off your price, but your costs don't move. Every dollar you give away comes straight out of your profit. That's why a small price cut can take a big bite out of what you earn.

Example: A $50 Hoodie at 10% and 25% Off

Say you sell a hoodie for $50. It costs you $30 to make and ship, so each full-price sale earns you $20.

Take 10% off and it sells for $45. Your cost is still $30, so you earn $15. You gave up $5, which is a quarter of your profit.

Go to 25% off and it's $37.50, which earns you $7.50. That's less than half of your usual profit.

Price	Profit per hoodie	Hoodies needed to earn $2,000
$50 (full price)	$20	100
$45 (10% off)	$15	134
$37.50 (25% off)	$7.50	267

So the 10% sale only pays off if it brings in about a third more sales. At 25% off, you'd need more than twice as many. That tipping point is the sale's breakeven point.

The Four Discount Types in Shopify

In your Shopify admin, discounts live under Discounts. When you make a new one, you pick a type:

Amount off products: a percentage or a fixed amount off chosen products or collections.
Amount off order: money off the whole order.
Buy X get Y: an item free or cheaper when the shopper buys a set item or spends a set amount. A BOGO deal is one version.
Free shipping: the shipping charge is removed.

You can run a discount as a code the shopper types in, or as an automatic discount that Shopify applies by itself. You also pick which other discounts it can combine with. That's called discount stacking. Once a sale's made, the discount shows up on the order, and your sales reports give discounts their own line, taken off gross sales.

A percentage and a fixed amount can be the same deal and still feel different to shoppers. Which one looks bigger depends on the price, as the Rule of 100 for discounts explains. For setup steps and help picking a type, see our guide to Shopify discounts. Need offers Shopify can't build on its own? Compare the best Shopify discount apps.

When a Discount Costs More Than It Earns

Many shoppers who use a discount would've bought anyway. On their orders, the discount wins you nothing and just lowers your profit.

Discounts also teach shoppers what your prices "really" are. Run sales too often and people learn to wait for the next one. That's called discount fatigue. And a lower price won't fix a problem that isn't about price, like a slow site or surprise shipping costs.

How deep you go matters too. The hoodie shows it: each extra step down makes the math harder. For help with that call, see how to choose a discount percentage.

Our app, Growth Suite, is built around this problem. It predicts who's likely to buy, so dedicated buyers can pay full price. A time-limited offer goes only to walk-away customers who are less likely to buy. Each offer uses a unique, single-use code that's deleted when its timer ends.

Myth: A Discount Only Costs the Amount Off

It's easy to think 10% off costs you 10% of the sale. On the hoodie, it cost a quarter of the profit. And if that buyer would've paid $50 anyway, the $5 bought you nothing.

Marking a product down and showing the old price as a compare-at price isn't a discount in Shopify, either. It's a price change. Shopify records the sale at the lower price, so it won't show up as a discount in your reports.