Business
Free Shipping Threshold Calculator
See the basket size that can absorb a shipping cost at your margin.
Where should free shipping start?
Free shipping is one of the strongest conversion levers in ecommerce, but it is also one of the easiest ways to give away margin on small baskets. The useful question is not whether to offer free shipping, but at what order value the postage cost roughly equals the gross profit on the goods you are trying to protect. This calculator works backwards from your average margin and the postage you would otherwise charge, so you can set a threshold that encourages add-ons without making every small order a loss. Start with the shipping rate you actually pay (or the flat rate you currently charge customers), then enter the gross margin you keep after product cost and selling fees. The result is a ballpark cart total where covering postage from margin becomes more sensible than absorbing it on every order. Real shoppers often add filler items to clear the bar, so treat the figure as a planning target rather than a guarantee. Pair it with your gross margin calculator and product profit tools if you are still refining unit economics. Figures are estimates for planning only, not financial advice.
Worked example
Suppose postage costs you £4.50 and you keep 35% gross margin after product and fees. The shipping cost divided by margin (£4.50 ÷ 0.35) is about £12.86 of goods needed to fund that postage from profit. A threshold around £30–£35 is common when you also want headroom for returns and payment fees — raise it if your margin is thinner, lower it if shipping is cheap and average order value is already high.
Limits and assumptions
The model assumes the threshold order has a similar margin mix to your average basket. It ignores promotional stacking, regional shipping bands, and the behavioural effect of free shipping on return rates. If lightweight SKUs have much lower margin than your average, set the bar higher or exclude them from free shipping.
Frequently asked questions
How do I choose a free shipping threshold?
Divide the shipping cost you absorb by your gross margin decimal, then add a buffer for fees and returns. Cross-check against your current average order value so the bar feels reachable.
Does free shipping always increase profit?
Not on its own. It often lifts conversion and average order value, but small baskets can become loss-making if the threshold sits below the value needed to cover postage from margin.
Should the threshold include VAT?
Match how you display prices on site. If customers see VAT-inclusive totals, set the threshold the same way so the checkout message matches the calculator.
What if shipping costs vary by weight?
Use a weighted average postage for your typical free-shipping basket, or set separate thresholds by shipping zone. This tool is a single-rate planning estimate.
How does this relate to break-even pricing?
Free shipping changes the contribution on each order. Use the break-even units calculator if you also need volume targets after the policy change.