Live calculator

Free Shipping Threshold Calculator

Find a free shipping threshold that feels commercially attractive without quietly stripping out margin.

Calculator

Set a threshold your margin can support

Current average order value

Product gross margin %

Outbound shipping cost per order

Packaging cost per order

Current shipping charged per order

Desired margin after free shipping %

Rounding increment

Use 5 if you want a clean threshold like 45 or 50.

Results

Suggested free shipping threshold

Suggested threshold

$40.00

Additional revenue needed

$2.00

Shipping subsidy per order

$3.20

Expected gross profit left per order

$21.60

Expected margin at threshold

54.0%

Threshold supports your target

The suggested threshold still leaves room for the target margin you entered.

Breakdown

How the threshold is estimated

Shipping subsidy per order

$3.20

Raw threshold

$7.62

Suggested threshold

$40.00

Additional revenue needed

$2.00

Margin at threshold

54.0%

How this is calculated

How your current free shipping threshold is calculated

This walkthrough updates live from the form so you can see how your per-order shipping costs and per-order shipping charge turn into a shipping subsidy, raw threshold, and suggested threshold.

Open the live calculation walkthroughUses your current free shipping inputs and results, with shipping amounts treated per order.

Input

Current inputs: current average order value = $38.00, product gross margin = 62.0%, outbound shipping cost per order = $6.50, packaging cost per order = $1.20, current shipping charged per order = $4.50, desired margin after free shipping = 20.0%, rounding increment = $5.00.

Formula

Shipping subsidy per order = outbound shipping cost per order + packaging cost per order - current shipping charged per order = $6.50 + $1.20 - $4.50 = $3.20.

Formula

Product margin rate = 62.0%. Target margin rate = 20.0%. The gap between them is 42.0%.

Formula

Raw threshold = shipping subsidy per order / (product margin rate - target margin rate) = $3.20 / 42.0% = $7.62.

Result

Suggested threshold takes the higher of the current average order value and the raw threshold, then rounds up to the chosen increment. Here that becomes $40.00.

Result

Additional revenue needed = suggested threshold - current average order value = $40.00 - $38.00 = $2.00.

Result

Expected gross profit left per order at the threshold = suggested threshold x product margin rate - shipping subsidy per order = $40.00 x 62.0% - $3.20 = $21.60.

Result

Expected margin at threshold = expected gross profit left per order at threshold / suggested threshold = $21.60 / $40.00 = 54.0%.

Meaning

In plain English: with your current assumptions, the calculator treats shipping cost, packaging cost, and shipping charged as per-order amounts, then checks whether the extra basket value created by a free shipping offer is enough to cover that per-order shipping subsidy without crushing margin.

How to use it

What a good threshold actually does

The goal is not free shipping for its own sake. The goal is a threshold that encourages a better basket while protecting economics.

A threshold only works when the added basket value contributes enough margin to cover the shipping subsidy.

Packaging and lost shipping revenue are part of the cost of free shipping, not side notes.

Once the economics work, rounding the threshold to a cleaner number can improve how the offer feels to customers.

FAQ

Common questions

Short answers to the free-shipping questions makers ask most often.

What is a free shipping threshold?

A free shipping threshold is the minimum basket value a customer must reach before you absorb the shipping cost instead of charging it at checkout.

Why can free shipping hurt profit?

If the threshold is too low, the extra revenue from larger baskets may not cover the shipping cost and margin lost on the order.

Should the threshold match average order value?

It usually works best when the threshold sits slightly above your current average order value so it nudges basket size upward without feeling unrealistic.

Do packaging costs matter when setting a threshold?

Yes. Packaging and fulfillment are part of the true cost of free shipping and should be included when you model profitability.

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