Free-Shipping Threshold Calculator

How to set a free-shipping threshold

A good free-shipping threshold sits above your average order value, so it encourages customers to add one more item, but not so high that the margin on that larger order fails to cover the shipping you absorb. This tool suggests a threshold roughly a quarter above your AOV, checks that the margin at that cart size still covers your shipping cost, and shows the minimum order value below which absorbing shipping loses money.

Why the threshold should be above your AOV

If you set free shipping at or below what customers already spend, you give away shipping on orders you would have won anyway. Set it modestly higher and the offer becomes a reason to add another item, lifting AOV. The trick is staying under the point where the stretch feels impossible, which is why a quarter above AOV is a common, workable starting point.

How this is calculated

The minimum viable threshold is your shipping cost divided by your gross margin, the order value at which margin exactly covers the shipping you absorb. The suggested threshold is the larger of that minimum and about 1.25 times your AOV, rounded to a clean price. Margin left at the suggested threshold is that cart value times your margin, minus shipping.

FAQ

Everything you need to know.

What should my free-shipping threshold be?

A common starting point is about 25% above your average order value, provided the margin on that larger order still covers the shipping you absorb. Enter your AOV, margin and shipping cost above and the tool gives you a specific number plus the minimum below which you would lose money.

Does free shipping actually increase average order value?

Yes, when the threshold is set above current AOV, because it gives shoppers a concrete reason to add one more item. Set at or below AOV it mostly just gives away margin on orders you would have captured anyway. The threshold placement is what makes it work.

How do I know if free shipping is costing me money?

Compare the margin on a threshold order with the shipping you absorb. If your shipping cost exceeds the gross margin at the cart size where you offer free shipping, you lose money on those orders. The minimum viable figure above is exactly that break-even point.

Should I offer free shipping at all?

If your margins are thin relative to shipping cost, a threshold set safely above AOV, partial free shipping, or building the shipping cost into price can work better than blanket free shipping. The calculator shows whether a clean threshold is realistic for your economics.