Ecommerce & Revenue
Free Shipping Threshold Calculator
Free shipping thresholds are usually set at a round number somebody liked. That is an expensive way to choose, because the threshold decides whether your most common order is profitable. This works it out properly.
Result
FormulaProfit at threshold = (threshold × gross margin %) − shipping cost. Minimum viable threshold = shipping cost ÷ gross margin %
Worked example
With a $62 AOV, $8 shipping cost and 45 percent gross margin, a $75 threshold leaves $25.75 of profit per order versus $27.90 today, so you give up about $2.15 per qualifying order in exchange for a bigger basket. The absolute floor is $17.78, below which a free shipping order loses money on its own. The threshold asks customers for $13 more than they currently spend, which is a realistic nudge.
What to watch for
The reliable rule of thumb is to set the threshold roughly 15 to 25 percent above current AOV. Set it much higher and customers abandon rather than add, which costs more than the shipping ever would.
Show progress toward the threshold in the cart, with the exact dollars remaining. That single piece of interface work does more for AOV in most stores than the threshold value itself.
Recalculate whenever carrier rates change or your product mix shifts. A threshold set two years ago against cheaper freight is quietly funding your shipping partner out of your margin.
Frequently asked questions
Should I offer free shipping on everything?
Only if your margin genuinely absorbs it or your prices already include it. For most stores a threshold is better, because it protects small orders and simultaneously pushes average order value up.
What if my AOV is already above the threshold?
Then the threshold is doing nothing except giving away shipping on orders that would have happened anyway. Raise it until it sits meaningfully above your current AOV, or replace it with a different incentive.
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