Pick a free shipping threshold that does not cost you money
Works out the order value at which giving shipping away costs you nothing, then has you test three thresholds against your own orders before you launch one.
What it does
- Writes out the four lines of arithmetic behind a shipping decision, including the break-even order value where free shipping stops costing you a dollar.
- Gives you a margin table across twelve order value bands, so you can see which baskets survive free shipping and which do not.
- Turns the monthly cost of free shipping into a number you can say out loud, instead of a feeling.
- Ends with a decision sheet that requires you to write the kill switch down before you launch, plus the four measures worth watching weekly.
Resource Teaser Preview
contribution after free shipping = contribution before shipping - cost of shipping per order
break-even order value = cost of shipping per order
/ (gross margin percentage - payment fee percentage)To unlock the full kit, complete prompt set, and automated workflow, request access below.
What you need
- Your cost of goods percentage and your payment fee percentage, both of which your platform shows you.
- What you actually pay per shipping label, returns included.
- Rough order value distribution from your last quarter of orders. Averages alone are not enough.
Setup
- Open margin-by-order-value.md, fill in the five inputs at the top and read the row for your current average order value.
- Calculate your break-even order value and mark it on the table, then note whether your typical order sits above or below it.
- Open threshold-worksheet.md and work steps 1 and 2, listing the share of orders that would qualify at each candidate threshold.
- Answer all four questions in step 3. If you cannot answer one, you have to run the test to find out.
- Write the decision in step 4 with a review date in the calendar, then measure average order value, qualifying share, contribution per order and return rate for four weeks.
On a real store
A fictional skincare brand running free shipping on every order works out that shipping is 20 percent of revenue on a typical order, not the basket size it assumed was the problem. They test thresholds of 50, 75 and 100 dollars, ship 75, and measure contribution per order for four weeks against the four weeks before. Every figure in the example is invented, shown so the arithmetic is visible rather than so you copy the answer.
Frequently Asked Questions
What threshold should I set?
Above your break-even order value, on a round number, with enough room that a customer aiming for the threshold still lands above break-even. Anything more specific than that is your own order data talking, not us.
How much extra revenue will a threshold get me?
We will not put a number on it, because we have no way to know yours. The kit deliberately leaves that blank in the worksheet. If you want the answer, run one threshold for four weeks and count, which is what the worked example does.
Should free shipping be a flat rate or free over a threshold?
If the answer is a flat rate, run this kit anyway. The break-even order value tells you what your average basket needs to be for the flat rate to stop costing you money, and most stores find that number is lower than they feared and higher than their average.
Want this done for you instead?
We run the whole audit for you: a scored read of your store, what's costing you sales this week, and what to fix first. $500, most stores get it back in the first fix.
Get the $500 audit