How to Calculate the Perfect Free Shipping Threshold

"Should I offer free shipping?" This is probably the question I get asked most often by Shopify store owners. And while free shipping can be great for sales, offering it on everything right away isn't always the best move. Let me share what I've learned from helping hundreds of merchants set this up.

First up, your free shipping threshold needs to make sense for your business. I've seen too many stores copy Apple or Amazon's free shipping minimum without thinking about their own numbers. That's like trying to compete with Walmart on price, it usually doesn't end well!

Here's what you need to look at:

Your average shipping cost is the first thing to check. Pull up your last 50 orders and look at what shipping actually cost you. Don't forget to include packaging costs, we know those fancy boxes aren't free! Let's say your average shipping cost is $8.50.

Next, look at your average order value. You can find this in Shopify's analytics. Let's say it's $65. This is important because you want your free shipping threshold to be a bit higher than what people typically spend - just enough that they'll add one more item to their cart.

Now for the fun part, your margins. If your average product margin is 40%, you need about $21.25 in extra sales to cover that $8.50 shipping cost ($8.50 ÷ 0.40 = $21.25. In other words, if you make $21.25 in revenue at a 40% margin, that yields about $8.50 in profit which is enough to cover the shipping cost.). This is super important. I've seen stores offer free shipping without doing this math, and they end up losing money on every "free" shipping order!

Putting it all together, a good free shipping threshold would be your average order value plus what you need to cover shipping. In our example: $65 + $21.25 = $86.25. Round that up to $89 or $99 (people love numbers that end in 9), and there's your threshold.

I've made a little free shipping calculator to help you calculate the perfect free shipping threshold for your Shopify store.

But here's where it gets interesting, you can get creative with this. One of our merchants only offers free shipping on their higher-margin products. They set this up in Better Shipping by creating a product group for their high-margin items, then made a shipping rule that gives free shipping when the cart is over $100 and also includes at least one of the high-margin products. Their regular products on their own have normal shipping rates. Pretty clever, right?

The key is to test and adjust. Start with the threshold you calculated, then watch what happens. Are people adding more to their cart to get free shipping? Great! Are your margins holding up? Even better! If not, you can tweak things until they work.

One last tip, make sure customers can easily see how close they are to free shipping. Something like "Add $23 more for free shipping!" can work wonders. You'd be amazed how many people will add something to their cart just to get that free shipping, even if they end up spending more than the shipping would have cost!

Want to try some of these strategies in your store? You can test them out with Better Shipping's 14-day free trial on the Shopify App Store. And if you're not sure about the setup, just email us. I love helping merchants figure this stuff out!