What these numbers say:
- At your current order value, shipping consumes 12.3% of revenue.
- Every subsidised order costs you $8.00 of margin, paid from the margin on the orders above your threshold.
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Want the threshold decision made on your real order data?
DNA builds the AI systems that read your order mix daily, so margin, subsidies and thresholds stop being guesswork.
Claim your free operation review & teardown →How to read this number
The headline figure is one division: your total shipping cost for the month divided by your total revenue for the month. It is the only number on this page that tells you how large shipping has become in your business, because it is the only one that scales with both volume and order value. Everything else here is arithmetic on top of that. The margin per order is your order value minus your cost of goods percentage minus your payment fee percentage, then minus your shipping cost if you are paying it.
These are the assumptions this calculator makes, and every one of them is set from your own inputs:
- Shipping cost is a single flat amount per order. Real shipping is priced by weight, zone and carrier, so a heavier basket or a rural postcode costs more than this figure shows.
- The cost of goods percentage you enter should be landed cost, meaning product, inbound freight and packaging. If it excludes packaging, your margin is slightly higher than shown.
- Payment fees are applied to the full order value, and are assumed not to include any additional fixed or international fee.
- No discounts, returns, refunds, taxes or duties are modelled. If you run sales often, your real margin per order is lower than the number here.
- The order value where shipping is exactly covered assumes every order carries a full shipping charge, with no free returns and no weight tiering.
- The bar is scaled to 20% of revenue so the full width is a readable ceiling. It is a position indicator, not a score and not a target.
- The volume line assumes every order that qualifies for free shipping carries the same flat shipping cost you entered. It does not model how many of your orders actually qualify, because that is your store's data, not an assumption this tool can make.
- The status badge is a label, not a benchmark. It reads shipping is eating your margin above 12% of revenue, material but manageable from 6% to 12%, and shipping is not your leak below 6%. Those cut points are a labelling convention chosen for this tool, not an industry figure, and you should move the goalposts if your own cost structure says they are wrong.
Nothing here predicts what will happen if you change a threshold. This tool shows what shipping costs you today, and what the arithmetic would look like at a different order value. What your customers do in response to a threshold is a question about your business, not a formula, so it is left out on purpose.
A worked example with the defaults
Take a store with a $65 average order value, $8 of shipping per order, cost of goods at 38%, payment fees at 2.9%, and 450 orders a month, with free shipping on everything. Cost of goods plus payment fees come to 40.9%, so each order keeps 59.1% as contribution, or $38.42. Shipping takes $8 of that, leaving $30.42 per order. Across 450 orders that is $3,600 of shipping against $29,250 of revenue, which is 12.3% of revenue. The order value at which shipping is exactly covered is $13.54, so an order has to be worth more than that before shipping starts costing you margin. To get shipping down to 1% of revenue at the same flat rate, the order value would have to be $800, which tells you something useful: at a flat $8 of shipping, getting shipping to 1% of revenue is not a threshold decision, it is a rate decision. Either the shipping rate per order falls, or the order value changes by an order of magnitude.
Why a free shipping threshold works arithmetically
A threshold is a subsidy. The orders above it get shipping for free, and the money for that subsidy has to come from somewhere. It comes from the margin on the orders above the threshold: at the defaults, each order above a threshold carries $38.42 of contribution, and each order below it, if the customer pays the shipping charge at cost, contributes roughly nothing after the carrier is paid. So the arithmetic is a simple transfer from the orders above the line to the orders below it, plus whatever the threshold does to how many orders land where.
That second half is the part that is a business question, not an arithmetic one. If some of your customers would have bought two items instead of one, the threshold pays for itself. If the customers who were going to add a second item would have bought it anyway, the threshold is a cost with no offset. This tool cannot tell you which case you are in, and neither can any calculator. What it can tell you is the size of the subsidy, so that you can go and check it against your own order data.
The three ways businesses fund free shipping
1. Raise the threshold. This is the direct lever: the higher the order value that qualifies, the fewer orders you subsidise. The cost of it is that some customers who would have bought will see the shipping charge and leave. The arithmetic here is the volume line above, which is simply your shipping cost multiplied by the share of orders that qualify.
2. Bundle to lift the order value. Sets, multipacks and add-on offers that raise what an average order is worth, which lowers shipping as a share of revenue without touching your shipping rate. Note the direction of the maths: a higher order value lowers the percentage, it does not change what you pay the carrier. Whether the bundle actually gets bought is a merchandising decision, and it is the one worth testing rather than assuming.
3. Charge flat-rate shipping on small orders. Charging the real cost, or a flat rate close to it, below the threshold keeps small orders near neutral instead of negative. On the defaults that recovers up to $8 per small order, which at 450 orders a month is worth $3,600 a month for every order that currently ships free. The trade is that a visible shipping charge at checkout is exactly what some customers abandon over, so the size of the effect depends on your checkout and your market.
What to do next
Put your real numbers in, not the defaults. Then take the share of orders that already sit above the number you are considering as a threshold, and multiply it by your monthly shipping cost. That is the size of the subsidy you would be creating or removing. Do the same arithmetic at two or three threshold levels before you commit to one, and write down what would have to be true about your order mix for each to work. If the answer requires customers to behave in a specific way, that is a test to run in your store, not an assumption to build a forecast on.
The number worth tracking after you make a change is this same percentage, measured monthly against the same definition. If shipping as a share of revenue is falling, the change is working. If it is not, the threshold is costing you margin and the arithmetic on this page is the size of it.