Free ForeverNo SignupFree Shipping ROIUpdated 2026

Shipping Profitability Calculator

Calculate whether your shipping policy is profitable — and find the free shipping threshold that maximises revenue.

Free shipping increases conversion rates (up to 30%) but costs margin on every order below the breakeven point. The optimal threshold: the order value at which the additional revenue from cart-size lift exceeds the shipping cost subsidy.

Avg Actual Shipping Cost

Your cost to ship one order (carrier rate)

Current Average Order Value

AOV without free shipping offer

Gross Margin %

Revenue minus COGS only

Shipping Policy to Model

What policy do you want to evaluate?

Free Shipping Threshold / Flat Rate ($)

Order value for free shipping, or flat rate charged

The Formula

Breakeven AOV = Shipping Cost ÷ Gross Margin%

In plain English

Breakeven AOV = shipping cost / gross margin %. Free shipping is profitable above this order value.

Worked Example

$7.50 shipping ÷ 60% margin = $12.50 breakeven AOV. At $75 AOV: $45 margin − $7.50 shipping = $37.50 net (50% effective margin).

Setting the Right Free Shipping Threshold

The optimal free shipping threshold is 15–20% above your current AOV. This triggers ~30% of customers to add more items to qualify, increasing AOV. The revenue lift from AOV increase typically exceeds the shipping cost on orders that were already above threshold.

Test it: run an A/B test with your current policy vs. free shipping above [AOV × 1.18]. Measure revenue per session, not just conversion rate. The winning policy maximises revenue per session, not AOV alone.

Shipping Policy Impact Benchmarks (2026)

Policy	CVR Impact	AOV Impact	Best For
Free on all orders	+20–30%	Neutral	High-margin, high-AOV stores
Free above threshold	+10–20%	+8–15%	Most e-commerce stores
Flat rate ($5–8)	+5–10%	Neutral	Low-margin stores
Calculated (actual rate)	Baseline	Baseline	Heavy/bulky goods

Source: Shopify Commerce Trends 2025 · Baymard Institute UX Research

Common Mistakes

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Offering free shipping without testing the threshold

Don't guess the right threshold — test it. A/B test free shipping at $50, $75, and $100 against your current policy. Measure revenue per session over 2–3 weeks to identify the winner.

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Absorbing shipping costs into COGS instead of modelling separately

Shipping is a significant cost centre. Track it as a separate line item in your P&L to see its true margin impact. Many founders are surprised how much it erodes profitability at scale.

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Not reassessing threshold as AOV changes

If seasonal promotions or new product lines shift your average AOV by 20%, your shipping threshold should be adjusted accordingly. Review quarterly.