How to use this calculator
- Enter or choose current average order value.
- Enter or choose gross margin.
- Enter or choose shipping cost you would absorb per order.
- The break-even free-shipping threshold updates as you type. Use Copy result or Share to keep it.
Method
Extra value = Shipping cost ÷ Gross margin; Threshold = AOV + Extra value
- AOV
- average order value before free shipping
- Gross margin
- as a fraction of revenue
Worked example
- Extra value = 6 ÷ 0.40 = 15.
- Threshold = 45 + 15 = 60.
- That is 15 ÷ 45 = 33.33% above the current AOV.
At a 40% margin, a 60 threshold lets the extra 15 of basket pay for the 6 of shipping.
What the result means
This is the break-even floor. If most customers would need to add a lot to reach it, few will; if it sits only slightly above your AOV, many will stretch to it. Test the threshold and watch AOV, conversion and shipping cost together.
Assumptions and limits
- Customers below the threshold keep paying for shipping as now.
- The extra items carry the same gross margin as the rest of the basket.
- It does not predict how many customers will raise their basket; that needs testing.
Questions
Should the threshold be above or below my AOV?
Usually somewhat above, so customers add an item to qualify. A threshold below your AOV gives free shipping to orders that would have happened anyway.
What if shipping cost depends on weight?
Use the average shipping cost for orders near the threshold.