Black Friday runs on codes. In the 2025 holiday season, US online discounts peaked at 18.8% off list price for furniture, 25.1% for apparel and 30.9% for electronics, according to Adobe (January 2026). A code pays for today's order with a lower price. Store credit pays for the next one: a share of the order comes back as a balance that only spends with you.
This guide works the math on one $400 Black Friday order, the illustration on Smile's Cashback page, for Shopify Plus and enterprise brands planning Black Friday on November 27, 2026. Shopify's rules were checked in its Help Center on November 13, 2026.
TL;DR: On a $400 Black Friday order at a 60% gross margin, a 20% discount code costs $80 and leaves $160 of gross profit, while 5% cashback paid as store credit leaves $240 and costs $20 only if the customer returns to spend it, and nothing if the credit expires. Offer cashback instead of discount codes for the orders you would win anyway and to earn a second order, and keep a code for price-led first orders or stock you need gone. Smile is our pick for Shopify Plus brands that want cashback in their own name, set up by our team: Smile Cashback, now in early access, pays a share of every paid order back as Shopify store credit that applies itself at the next checkout. More Shopify Plus brands run loyalty on Smile than on any other platform (Store Leads, October 2026).
Store Credit vs Discount Codes on a $400 Black Friday Order
The same $400 order three ways: a 20% sitewide code, a $20 code of equal value, and 5% cashback paid as $20 of store credit.
| On a $400 order at a 60% gross margin | 20% off code | $20 off code | 5% cashback as store credit |
|---|---|---|---|
| Customer pays on Black Friday | $320 | $380 | $400 |
| Gross profit on the Black Friday order | $160 | $220 | $240 |
| Incentive cost on the Black Friday order | $80 | $20 | $0, the $20 is held through the return window |
| Customer returns for a $220 second order | Pays $220, full price | Pays $220, full price | Pays $200; the $20 credit pays the rest |
| Gross profit across both orders | $292 | $352 | $352 |
| Customer never returns and the credit expires unspent | The $80 is already spent | The $20 is already spent | The credit costs $0 |
| Gross profit if the customer never returns | $160 | $220 | $240 |
Illustrative, not a forecast. Assumptions: a 60% gross margin, so product cost is 40% of list price ($160 on the $400 order, $88 on the $220 order); a 5% cashback rate; credit held through a 30-day return window; shipping, tax and payment processing left out. Gross profit is what the customer pays minus product cost. 20% code: $320 minus $160 is $160, then $220 minus $88 is $132, so $292 in all. $20 code: $380 minus $160 is $220, plus $132, so $352. Cashback: $400 minus $160 is $240, then $200 minus $88 is $112, so $352.
- At equal value, the cost is the same when the customer comes back. A $20 code and $20 of credit both end at $352. If the customer never returns, the code's $20 is already gone; the credit is never spent.
- Against a 20% code, cashback costs a quarter as much even if every credit is spent: $20 against $80, and $60 more gross profit.
- Not every credit gets spent. If half is, close to the 41% to 60% reward redemption rate brands most often report for their loyalty programs (EY, 2025), cashback averages $10 per $400 order, or 2.5%. More benchmarks: our loyalty program statistics.
One cost to add: for Shopify stores created on or after May 12, 2025, Shopify charges third-party transaction fees "on the order amount paid for using store credit" (Shopify Help Center, November 13, 2026). The rate depends on your plan: at the 0.2% Shopify lists for Plus, it is 4 cents on $20 of credit. Stores created before that date don't pay it.
How Many More Orders a 20% Code Must Win
A deeper code can still win if it brings in enough extra orders. Counting each credit as a cost of the order that earned it, a 20% code needs this many more Black Friday orders to match 5% cashback on gross profit:
| Gross margin | If every credit is spent | If half the credit is spent |
|---|---|---|
| 50% | 50% more orders | 58.3% more orders |
| 60% | 37.5% more orders | 43.8% more orders |
| 70% | 30% more orders | 35% more orders |
The formula is (gross margin minus cashback's cost as a share of the order) ÷ (gross margin minus the code's depth), minus 1. At a 60% margin with every credit spent: (60 minus 5) ÷ (60 minus 20) = 55 ÷ 40 = 1.375, so 37.5% more orders. If no credit is ever spent, the bar is the same as matching full price, 50% more orders at a 60% margin, as our guide to reducing discounting with a VIP program shows. Second orders are left out on both sides.
Rule of thumb: unless you expect a 20% code to win at least 37.5% more Black Friday orders than cashback at a 60% margin, cashback makes more gross profit.
Store Credit Is a Payment Method, Not a Discount
On Shopify, store credit is a payment method. A discount code lowers the order's price; store credit pays toward what is left, as a gift card does, and Shopify lists it as a payment provider in reports such as Net payments by gateway. Three things follow:
- The order keeps its price. The $220 second order stays a $220 sale, $20 of it paid with credit, with no discount on it.
- The cost moves to the next order, and never lands if the credit expires.
- Unspent credit is owed, so finance tracks it (see the accounting basics below).
Spent credit costs what a discount of the same size would; what changes is who gets it, when the cost lands and whether it lands at all. Whether your team calls it cashback vs coupons or store credit vs discount codes, that timing is the difference.
When a Discount Code Still Makes Sense
Codes win when the job is today's order:
- A first order you would otherwise lose. A shopper new to you and comparing on price responds to money off now; credit pays back only if they return.
- Stock you need gone by a date. Run the code and exclude those products from earning cashback, so you don't pay for them twice.
- Products other retailers sell at the same list price. If the item is 25% off elsewhere, match it with a code.
- Shoppers who won't sign in. Store credit spends only for customers signed in through customer accounts or Shop Pay.
Cashback wins when the job is the order after: returning customers who would buy anyway, full-price bestsellers, large baskets where a percentage code gives away the most dollars, and Black Friday buyers you want back in January. It also filters deal hunters, since a shopper who never returns costs nothing.
Rule of thumb: use a code for the order you would otherwise lose, and cashback for the orders you would win anyway and the one after. If you run both, price them together: nothing in Shopify's store credit settings stops a customer using a code and credit on one order.
How Store Credit Works on Shopify
Shopify's rules, from its Help Center on November 13, 2026:
| Shopify rule | What it means for Black Friday cashback |
|---|---|
| Store credit is a payment method at checkout; Shopify holds the balance | One balance wherever the customer shops with you |
| Customers spend it signed in through customer accounts or Shop Pay, not legacy customer accounts | Move to customer accounts before Black Friday |
| Accepted on the online store, Shopify POS and the Shop app, not other channels, draft orders or edited orders | Credit earned online spends in store |
| The full balance applies, up to the order total; customers can't choose part of it | At 5%, a balance is usually smaller than the next basket |
| Store credit settings don't restrict discount codes on the same order | Size your code and cashback rate together |
| Subscriptions: the first order only. Several currencies: only the checkout currency's balance shows | Plan subscription and cross-border offers separately |
| Under $15,000 USD per customer account; expiry set per issuance, earliest-expiring credit spent first | Check local laws before setting an expiry, as Shopify advises |
| Stores created on or after May 12, 2025 pay third-party transaction fees on the amount paid with store credit | 4 cents on $20 at Plus's 0.2% rate |
Gift cards are a payment method too, but whoever holds the code can spend one. Store credit belongs to the customer's account, so the reward stays with the person who earned it.
Holding Periods, Returns and Expiry
Black Friday orders come back: retailers expected 17% of 2025 holiday sales to be returned (NRF and Happy Returns, October 2025). Set three rules before the first order:
- Hold credit through your return window, so returned orders never pay out. With a 30-day window, a November 27 order's credit lands on December 27.
- Let the reward follow the order. Refunds, cancellations and order edits should shrink it. In Smile Cashback they do, with nothing to reconcile by hand.
- Set an expiry, with reminders. A deadline gives customers a reason to return and limits how long you owe the balance. Smile Cashback lets you set expiry from 14 days to five years, or never, and emails customers before credit expires, by default 30, 7 and 1 day before.
Decide too whether sale items earn. If you exclude them and your Black Friday offer is a markdown, those items earn nothing.
How to Get Black Friday Customers to Make a Second Purchase
Give buyers a balance that only spends with you, show it at every step, and land it after the return window. The illustration on Smile's Cashback page, with a 30-day hold and a 30-day expiry:
| Date | What the customer sees |
|---|---|
| November 27 | Thank-you page: $20 back on a $400 order |
| December 27 | The credit lands; an email says it is ready to spend |
| January 19 | A reminder: 7 days left on the $20 |
| January 25 | A last reminder, then a $220 second order with the $20 applied |
- Show the reward around the purchase: what each item earns on product pages, and what the order earned on the thank-you page.
- Get buyers signed in. Shopify shows the balance at checkout to customers signed in through customer accounts or Shop Pay.
- Set the expiry inside your reorder window and let the reminders work.
- Measure the Black Friday cohort: the share of first-time buyers who order again within your window, against last year's. Our guide to increasing repeat purchase rate shows how to find that window.
If the credit brought the customer back, they paid $200 on the second order, $112 of it gross profit, for $20 of credit, and repeat orders are what lift customer lifetime value.
Accounting Basics for Unspent Store Credit
Shopify's retailer guide describes store credit as a liability on your books until it is spent (Shopify, March 2026), and Shopify's Outstanding store credit balance report tracks the total. Under US GAAP (ASC 606), a reward earned with a sale is a material right: part of the sale's revenue is allocated to it and deferred until the reward is redeemed or expires, as BDO explains for loyalty points (2018). A code simply lowers the price of the order it is used on. An expiry date limits how long a credit stays on the books; our guide to what a loyalty program costs covers reward liability in a budget. Agree the treatment with your finance team or auditor. This is general information, not accounting or legal advice.
Running Cashback on Shopify with Smile
Smile Cashback is built on Shopify's own store credit. Smile works out what each paid order earns and issues it as Shopify store credit in your brand's name; Shopify holds the balance and applies it as a payment, up to the order total, online, at Shopify POS and in the Shop app, when the customer is signed in.
- Your terms. You set the rate and decide what counts toward it, exclude products, collections, tags or sale items, and choose the holding period and the expiry. Gift cards and tips never earn.
- Shown where customers decide. Product pages show what each item earns, the thank-you page what the order earned and when it lands, and the account page the balance, pending credit and when it expires.
- Set up with our team, in early access. A 30-minute call covers your catalog, return window and what a rate would cost you; then you set your terms. The blocks go in through your theme editor with no code, and nothing shows to customers until you press Activate.
Smile is Built for Shopify, a Shopify Certified Technology Partner, a 2026 Shopify Build Award winner and SOC 2 Type II audited (May 2026). For every cashback and store credit app compared, see the best cashback and store credit apps for Shopify.
Frequently Asked Questions
Should my ecommerce brand offer cashback instead of discount codes for Black Friday? For the orders you would win anyway, yes. On a $400 order at a 60% gross margin, a 20% code costs $80 on the day; 5% cashback costs $20, and only if the customer returns to spend it. Keep codes for price-led first orders and clearance. Smile Cashback, in early access, runs it on Shopify's own store credit.
Is store credit better than discount codes for ecommerce margins? Per order, yes. The same $400 order keeps $240 of gross profit with 5% cashback against $160 with a 20% code. At a 60% margin, the code needs 37.5% more orders to match, even if every credit is spent.
Is store credit a discount? No. On Shopify, store credit is a payment method that pays toward an order, as a gift card does; a discount code lowers the price. Unspent credit is a balance you owe until it is spent or expires.
Can customers use a discount code and store credit on the same order? Yes. The code lowers the price, the credit pays toward the rest, and Shopify's store credit settings have no option to block the combination. Size your Black Friday code and cashback rate together.
Are there fees when customers pay with store credit on Shopify? Yes, for Shopify stores created on or after May 12, 2025: Shopify charges third-party transaction fees on the part of an order paid with store credit, at your plan's rate. Shopify lists 0.2% for Plus (November 2026), or 4 cents on $20. Stores created before that date don't pay it.
Can customers spend part of their store credit balance? Not by choice. Shopify applies the full balance, up to the order total, and anything over the total stays in the balance. At a 5% rate, a balance is usually smaller than the next order.
Is unspent store credit a liability? Yes. Shopify's retailer guide treats unspent store credit as a liability until it is spent, and under ASC 606 the part of a sale allocated to an earned reward is deferred until it is redeemed or expires (BDO, 2018). Agree the treatment with your finance team.
