At what order value should shipping be free?
Three numbers is all it takes. The tool works out the order value at which your margin covers delivery, and the threshold to display in your store to pull average orders up.
The calculation works on gross margin, before fixed costs. It gives you a profitability floor, not a profit forecast.
Two thresholds,
and only one that binds
The tool works out both, and shows you the one that constrains you. Here is what each of them means.
The first is the break-even threshold, and it is arithmetic: your gross margin has to cover the cost of the shipment, so the minimum order is shipping cost divided by your margin rate. At €6 of shipping and 40% margin, delivery pays for itself from €15 an order. Below that amount, every order you ship free eats into your margin instead of building it.
The second is the recommended threshold, and it follows the industry convention: set free shipping 20 to 30% above your average order value. A threshold below that average is met on its own and changes no behaviour at all, you have merely stopped charging for shipping the customer was already paying. Set a little above, it gives a reason to add an item.
The tool takes whichever of the two is tighter. If your margins are comfortable, the average-order convention decides. If they are tight or your parcels bulky, the accounting break-even takes over, and the tool flags it under the result.
What does a parcel
actually cost you?
You already know the first two numbers: your average order is in your back office, your margin is in your product data. The third is the one almost nobody can produce. Every carrier invoices separately, surcharges land at the end of the month, and volumetric weight bills the space rather than the scale. So the average cost of a shipment gets rebuilt by hand from several invoices, and most merchants are working from an estimate. Without that number, the threshold you just calculated rests on a guess.
- Average cost per parcel, over 7 days, 6 months or 1 year
- Rates compared live on your own carrier accounts
- Surcharges and volumetric weight included in the cost shown
Questions about
free shipping thresholds
At what order value should you offer free shipping?
How do you calculate a free shipping threshold?
Does free shipping really raise average order value?
Should packaging be included in the shipping cost?
Does this calculation account for fixed costs?
How do you find the real cost of a shipment?
Take the stress out of shipping with ParcelRush
The dashboard shows your average cost per parcel, carrier by carrier, calculated on your own negotiated rates. Over 7 days, 6 months or a year, with destinations and delivery issues. That is exactly the number your calculation was missing: your threshold stops being an estimate.
