What Is a Discount Code? Coupon Codes on Shopify

How a Discount Code Works on Shopify

You make codes in your Shopify admin, under Discounts. Pick the code, something like WELCOME10, and then choose what it does: a percentage off, a fixed amount off, free shipping, or buy X get Y.

Next come the rules. You can add a minimum purchase, limit who can use it, cap the total number of uses, or allow one use per customer. There are start and end dates too, plus a setting for whether it combines with other discounts.

Shoppers type the code into the discount box at checkout. Shopify also gives every code a shareable link, and opening that link applies the code. Once the sale goes through, the order shows which code was used.

Don't mix up a code with an automatic discount. That one applies itself as soon as the cart meets the rules, so there's nothing to type.

What a 20% Code Really Costs You

A code cuts the price, and it cuts your profit per order by an even bigger share. Take a simple example.

Example: a candle store's 20% code

Say the average order is $50 and the gross margin is 60%. That leaves $30 from each order after product costs.

A 20% code takes $10 off, so each order now leaves $20. Your profit per order just dropped by a third.

At full price, 100 orders earn $3,000. At $20 an order, you'd need 150 orders to earn that same $3,000 ($3,000 ÷ $20). That's 50% more orders just to stay even, if every buyer uses the code.

So a code only pays off if it brings in enough orders that wouldn't have happened without it. How big the code is matters a lot here, and our guide to choosing a discount percentage goes into that.

When Codes Help and When They Leak Margin

Codes work well when you want to reach one group on purpose. A welcome code for new email subscribers is a good example. So is a separate code for each influencer or podcast you work with. Every order shows its code, so you can see which orders came in through which one.

Problems start once a code goes public. People forward it, and it ends up on coupon sites and in browser extensions. Then shoppers who were ready to pay full price get the discount too.

Even the code box can leak. A shopper who sees that empty box may leave checkout to hunt for a code, and they may not come back. You can put the code in for them, and our guide to auto-applying discount codes on Shopify shows how. If Shopify's built-in settings aren't enough, we've rounded up the best Shopify discount apps.

How Growth Suite Uses Discount Codes

Growth Suite, our app, works differently from a public promo code. It watches how each visitor browses and predicts how likely they are to buy. Dedicated buyers see no offer and pay full price. The time-limited offer goes only to walk-away customers, the ones who need a nudge.

Each of those visitors gets their own unique, single-use code. The app applies it to the cart, so nobody has to type anything. When the countdown ends, the code gets deleted on the server. So the deadline is real. It isn't a timer that resets when someone refreshes the page.

You pick the lowest and highest discount the app can offer. You can cap the discount amount as well, and leave out products by vendor, title or sale status.

The Myth: Lots of Redemptions Means the Code Works

A code with 500 uses looks like a hit. But that number counts every order that used the code, including ones from people who'd have paid full price anyway. Lots of use can just mean you handed a discount to your best customers.

What you really want to know is how many orders the code added, and a redemption count can't tell you that. An A/B test, where some visitors get the code and some don't, is one way to find out.