Notes / Conversion Works
How should you set a free-shipping threshold?
Choose a free-shipping threshold using basket values, margins and fulfillment costs. Learn how to test contribution, conversion and returns before changing it.
By Edu Rigonato. Published Oct 1, 2026. 10 min read.
A customer adds another item to qualify for free shipping. The order value rises. That looks like a win—until the extra merchandise margin turns out to be smaller than the shipping charge you waived.
Set a free-shipping threshold by examining your basket values, product margins and fulfillment costs, then comparing a few plausible policies. Judge the result by contribution across eligible visitors, with conversion and returns in view. A percentage above average order value can suggest a test candidate; it cannot tell you whether that candidate is profitable.
The useful question is what changes when the threshold changes: who buys, what they buy, which shipping charges you collect, and what it costs to fulfill and keep those sales. Working through those questions gives you a decision you can defend, even when the answer is to keep the current policy.
Why can a higher average order value leave less profit?
Average order value describes the orders you receive. It leaves out the people who decide not to buy, and it does not deduct the costs attached to the orders that remain.
Consider a deliberately simplified example. A customer would have purchased $50 of merchandise and paid a $6 shipping charge. Your merchandise contribution before shipping is 40%, and the carrier costs $8. That leaves $18: $20 from merchandise, plus $6 collected for shipping, minus $8 paid to the carrier.
Now imagine a $60 free-shipping threshold persuades that same customer to add $10 of merchandise. At the same margin and carrier cost, the order leaves $16: $24 from merchandise, no shipping charge collected, minus $8 to the carrier. The basket grew by $10, but contribution fell by $2.
This is arithmetic, not an observed customer result. It assumes the original purchase would have happened, the extra item has the same margin, and shipping cost does not change. It also leaves out payment fees, handling and returns to make the tradeoff visible. In a real test, those assumptions need replacing with actual costs and outcomes.
Frequently asked questions
How do I calculate the minimum order for free shipping?
Compare plausible minimums against your actual baskets. For each, estimate merchandise contribution, shipping charges you would give up and fulfillment costs. Check whether useful additions can close the gap, then test the candidate against your current policy. Historical order arithmetic helps screen options; it cannot predict how many shoppers will buy or leave.
How does average order value affect the free-shipping calculation?
AOV describes completed orders under your current policy. It can help you choose a candidate, but it is not automatically a cost to subtract or proof that a threshold will work. Separate total order contribution from the change caused by the policy. Review the basket distribution too, because a few large orders can move the average.
Should I offer free shipping on every order or set a minimum?
Compare both policies using your product mix and shipping costs. A minimum may limit subsidies on smaller baskets but discourage some purchases; free shipping on every order may remove a condition while costing more on orders you would already receive. Neither is always better. Evaluate contribution across eligible visitors, including nonbuyers and returns.
Is the free-shipping minimum calculated before or after discounts?
It depends on the platform and shipping mechanism. For <a class="inl" href="https://help.shopify.com/en/manual/discounts/discount-types/free-shipping">Shopify free-shipping discounts</a>, products count at their discounted prices when the discounts can be combined; taxes do not count toward the minimum. Check the rules for your specific setup and make the cart message match checkout. Do not assume that every shipping-rate rule or app behaves identically.
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