A single free-shipping threshold can be generous for one SKU mix and destructive for another. The useful threshold is the order value at which contribution after product cost and variable fees can absorb the seller-paid shipping subsidy.
required order value ≈ shipping subsidy ÷ contribution rate before shippingStart from contribution before the shipping subsidy
If an order has a 40% contribution rate before seller-paid shipping and the average subsidy is $8, a simple starting threshold is $20 of contribution-required revenue for that shipping burden. Real stores should then layer in fixed payment fees, fulfilment, discounts and return loss.
Three illustrative margin profiles
| Profile | Contribution before shipping | Shipping subsidy | Revenue needed just to fund shipping |
|---|---|---|---|
| Low margin | 20% | $8 | $40 |
| Medium margin | 35% | $8 | $22.86 |
| High margin | 50% | $8 | $16 |
Those figures are not recommended thresholds. They show why the same shipping promise consumes very different shares of contribution. A practical threshold must also leave the profit you actually require.
Use a controlled threshold test
Compare current AOV, conversion rate, order contribution and shipping subsidy before and after the threshold change. A higher AOV is not automatically a win if contribution per visitor falls. Keep the test long enough to include normal order mix and avoid changing discounts at the same time.
Decision rule
Choose the lowest threshold that still leaves your required contribution after the expected shipping subsidy. Use the Product Margin Calculator on representative baskets, then verify the threshold with realized order data.
Use your own numbers
Every worked number on this page is illustrative. Replace it with current data from your own statements, invoices, supplier quotes and operating history. Profit Per Order calculators keep assumptions editable so a content example never becomes a hidden business rule.
For a paid decision layer, inspect the public Profit Action Report sample before considering the one-time $19 report.