A starting point, not an optimal threshold
A free shipping threshold is the cart value at which you stop charging the customer for delivery. The calculator estimates the additional merchandise revenue needed to support that offer using your entered margin. It does not model demand, conversion rates or customer preferences, so the result is not an optimal threshold. Treat the output as a margin-safe starting point that still needs commercial testing against your product range, order mix and shipping destinations.
The formula
Keep currency, units and time periods consistent. Percentage inputs use percentage points (enter 5 for 5%). Results are rounded only for display; tiny nonzero values may use scientific notation. Undefined ratios are shown as unavailable.
With a $60 AOV, a 40% margin and $8 merchant shipping, the full-cost threshold is $80. If customers currently pay $5 shipping, replacing that charge instead requires a $72.50 threshold. At a proposed $75 threshold, $15 extra revenue produces $6 of margin, leaving a $2 shortfall against the full shipping cost.
Why average order value is not enough
AOV describes a typical basket’s revenue, but it does not say how much of an extra purchase remains after its costs. Two stores can have the same AOV and very different capacity to absorb delivery. Divide shipping cost by the contribution margin of incremental merchandise to estimate the extra revenue needed. A low margin requires a larger cart increase. If margin is zero, extra sales do not provide contribution to fund shipping, and this formula has no finite answer.
Choose the margin definition carefully
Gross margin commonly deducts product cost only. Contribution margin also deducts relevant variable costs such as percentage payment fees or marketplace charges. For this calculation, use a margin that reasonably represents the additional items customers might add. Do not subtract a fixed shipping cost inside the margin and then charge the same cost again in the threshold formula. If different products have very different margins, review representative baskets separately instead of relying on one store-wide percentage.
When customers already pay shipping
The full-cost approach asks extra merchandise contribution to cover the entire merchant shipping bill. The profit-preserving approach asks it to replace the customer shipping charge that disappears, assuming the merchant shipping cost was already present in the baseline. These are different comparisons, so both can be useful without being contradictory. The advanced result shows them separately. If heavier baskets increase merchant shipping or customer charges were already waived for some orders, revisit the baseline assumptions.
Turn a threshold into realistic baskets
Round the mathematical threshold upwards, using the selected increment. Rounding down can remove the contribution the formula was meant to preserve. The typical-item calculation rounds up the number of extra items required to close the cart gap from AOV. This is a simple basket illustration, not a claim that every customer will add those items. The proposed-threshold comparison shows extra spend, additional margin and the remaining shipping surplus or shortfall so you can inspect a practical price point.
Stress testing and commercial review
The stress test considers higher shipping cost, a five-percentage-point lower margin, and both changes together. Percentage points differ from a relative percentage decline: forty percent minus five points becomes thirty-five percent. Test the offer using actual basket contribution, shipping destinations, conversion and return behavior. Free shipping everywhere removes the threshold incentive and has different economics. A threshold can protect the modeled margin while still reducing conversion, so the mathematical result must be reviewed alongside observed customer behavior.
Method and reference sources
Method and content checked 2026-09-20. These sources provide background, not endorsement or professional certification. The formula and limitations above define this calculator.
- SBA — Break-even pointContribution, variable costs and fixed-cost break-even context; tool-specific extensions are explained above.
Frequently asked questions
Why are there two possible free-shipping thresholds?
One funds the full merchant delivery cost through extra merchandise margin. The other replaces the shipping charge customers previously paid. Choose the baseline that matches the decision.
What is a worked example for Free Shipping Threshold?
With a $60 AOV, a 40% margin and $8 merchant shipping, the full-cost threshold is $80. If customers currently pay $5 shipping, replacing that charge instead requires a $72.50 threshold. At a proposed $75 threshold, $15 extra revenue produces $6 of margin, leaving a $2 shortfall against the full shipping cost.