What this shipping calculator answers
A free-shipping threshold is a pricing decision, not a carrier rate. Shopify lets you make a shipping rate free once the order reaches a minimum order amount. The customer sees “free shipping”; the merchant still pays the carrier. This page models that trade: the extra basket value needed to qualify, the shipping revenue you give up, and the contribution margin left after product and shipping costs.
The definitions used here
- AOV is merchandise value per order, before shipping and tax.
- Threshold is the merchandise value where shipping becomes free.
- Shipping charged is what the customer pays for shipping today. At or above the threshold it becomes zero.
- Contribution is merchandise value + shipping charged − product cost − actual shipping cost.
- Margin is contribution ÷ merchandise value. Shipping charged is an offset, not merchandise revenue.
Shopify’s free-shipping discount documentation says the minimum purchase amount counts product prices only; taxes are not included. That is why the model uses merchandise value rather than the total the customer pays.
How to calculate a safe threshold
At or above the threshold, the customer pays no shipping. The order has to cover product cost and the shipping you absorb, and still leave the margin you want. With a product cost that is a percentage of price, the minimum basket is:
Safe threshold = shipping cost ÷ (1 − product cost % − target margin %).
With a fixed product cost per order, the product cost does not grow with the basket, so the formula is:
Safe threshold = (product cost + shipping cost) ÷ (1 − target margin %).
If the target margin is at or above the gross margin left after product cost, the first formula has no positive answer. A fixed shipping cost keeps margin below the gross margin at every threshold, even a very high one. The calculator says the target is unreachable instead of returning a negative or infinite threshold.
A worked example
AOV 60.00, product cost 40% of price, actual shipping 12.00, shipping charged 8.00, proposed threshold 75.00, target margin 50%.
| Scenario | Merchandise | Product cost | Shipping | Contribution | Margin |
|---|---|---|---|---|---|
| Below threshold | 60.00 | 24.00 | 12.00 paid, 8.00 charged | 32.00 | 53.3% |
| At 75.00 | 75.00 | 30.00 | 12.00 paid, 0 charged | 33.00 | 44.0% |
| Safe at 120.00 | 120.00 | 48.00 | 12.00 paid, 0 charged | 60.00 | 50.0% |
Scroll sideways to see the full table.
The proposed threshold adds 15.00 of merchandise, which produces 9.00 of contribution at a 60% gross margin (100% − the 40% product cost). It also gives up 8.00 of shipping revenue, so contribution rises by 1.00 per order. Margin still falls from 53.3% to 44.0%, because the denominator grew from 60.00 to 75.00. The threshold is better on contribution but misses the 50% target. The safe basket is 120.00: 12.00 ÷ (1 − 0.40 − 0.50) = 120.00.
Why contribution and margin can move in opposite directions
Free shipping is a discount on shipping revenue. If the basket lift produces more contribution than the shipping you waive, contribution goes up. But margin is contribution divided by a larger merchandise base. A threshold can improve contribution per order and still dilute margin. Decide which number your business needs: cash contribution per order, margin percentage, or both.
A threshold below your current AOV is a different case. Every current order already qualifies, so you give up shipping revenue without requiring a larger basket. The calculator uses your AOV as the at-threshold basket in that case, and the “AOV lift needed” is zero. That can be a valid strategy, but it is a straight discount, not a basket-building threshold.
Sensitivity and the qualifying share
The sensitivity table shows contribution and margin at several thresholds around the one you entered, plus the safe threshold. It holds product cost and shipping cost constant. It is arithmetic, not a forecast.
The optional share is the percentage of orders you expect to reach the threshold. The blended estimate is (1 − share) × below-threshold contribution + share × at-threshold contribution. It assumes qualifying orders land at the threshold and the rest stay at today’s AOV. It does not predict conversion, basket lift, or the share itself. Enter a share only when you have your own evidence, and label the result as an assumption.
How to choose a threshold
- Look at your order-value distribution, not only the average. A threshold just above a common order value asks many customers for a small add-on; one far above it may mostly discount orders that would have qualified anyway.
- Pick the product-cost basis that matches the extra basket. More of the same product usually means a percentage; an add-on with little incremental cost can be a fixed amount.
- Set the target margin from your own overhead and profit goal. There is no universal number.
- Compare the proposed threshold with the safe threshold. If it is below, either raise the threshold, cut product or shipping cost, or accept a lower target.
- Test one change at a time and keep the old threshold’s data. The calculator gives you the arithmetic; your orders give you the response.
Sources:Shopify Help: Setting up shipping rates,Shopify Help: Free shipping discounts,Shopify Help: Shipping labels, and Shopify Help: Creating a shipping strategy, all checked 2026-11-03.