How this calculator works
"Free shipping over $50" is a pricing decision, not a marketing one. Below the right threshold you are funding postage out of profit; far above it, nobody reaches the bar and the offer does nothing.
This finds the order value at which absorbing shipping still leaves your target margin, and compares it against what your customers actually spend.
The formula
- Contribution rate = gross margin % − selling fee %
- Threshold = shipping cost ÷ (contribution rate − target margin)
- Break-even threshold = shipping cost ÷ contribution rate
- Profit at an order value = order × contribution rate − shipping cost
What to watch for
- The threshold is where absorbing shipping still leaves your target margin. The break-even threshold is lower — that is where free shipping costs you nothing but earns nothing either.
- A threshold more than about double your average order will not lift basket size; it will read as unreachable and be ignored. Somewhere between 1.2 and 1.6 times your average is where thresholds actually change behaviour.
- If your contribution rate does not exceed your target margin, no order value works. That is a pricing problem, not a shipping one, and the calculator says so rather than returning a very large number.
- Thresholds are most effective when they sit just above a natural basket size — where adding one more item gets the customer there.
Common mistakes
- Copying a competitor’s threshold without checking your own margin or shipping cost.
- Setting the threshold at your average order value, which means half your orders lose money.
- Forgetting that marketplace fees are charged on the higher item price you used to cover shipping.
- Using postage alone as the shipping cost and ignoring the box, filler and packing time.
Frequently asked questions
What should my free shipping threshold be?
Divide your shipping cost by your contribution rate minus your target margin. With $7.50 of shipping, a 55% gross margin, 3% fees and a 30% target, the threshold is around $35 — but if that sits below your average order, you are giving away shipping on orders that would have happened anyway.
Should the threshold be above my average order value?
Usually somewhere between 1.2 and 1.6 times it. Below your average and you subsidise orders that were already coming; more than double and customers treat it as unreachable. The point of a threshold is to move a basket that is nearly there, not to reward one that already arrived.
Is free shipping worth offering at all?
It reliably lifts conversion, and shoppers are notoriously sensitive to shipping shown at checkout. The question is whether your margin can carry it. If the calculator shows no workable threshold, the honest answer is that your prices need to rise before free shipping is affordable.
Should I just raise prices and offer free shipping on everything?
It works when shipping is a small and predictable share of order value, and it removes the checkout shock entirely. It works badly when shipping varies a lot by weight or destination, because you either overcharge light orders or lose money on heavy ones. Model both before committing.