“Should I offer free shipping?” is the wrong question, because the honest answer is always it depends. Shoppers overwhelmingly prefer it — most will add an item to a cart to avoid paying for shipping. The real question is whether you can offer it without quietly eroding your margin. That comes down to math, and the math is not complicated.
Free shipping is never free — to you
When a customer sees “free shipping,” someone still pays the carrier. That someone is you. So free shipping is only worth it if the orders it encourages bring in more margin than the shipping costs you. The lever that makes that true is the threshold — the cart total a shopper has to reach to unlock it.
Set the threshold too low and you give shipping away on orders that were always going to happen. Set it well, and the extra items shoppers add to qualify more than cover the cost. Same policy, opposite outcome, decided entirely by one number.
The break-even threshold
Start with the absolute floor — the point where the added margin just covers the shipping you are giving away:
Minimum threshold = all-in shipping cost ÷ gross margin %
Say shipping (carrier plus packaging) costs you $8 an order, and your gross margin is 40 percent. Your break-even is $8 ÷ 0.40 = $20. Below a $20 threshold, free shipping is costing you money. That is the floor, not the goal.
In practice you want a buffer above break-even, both to leave real profit and because the threshold also has to do its other job: nudging a shopper to add an item. That is why a practical threshold usually lands a good bit higher than the bare break-even — commonly 15 to 25 percent above your average order value, as long as that clears the floor above.
When free shipping doesn’t pay
It is not always the right call. Watch out when:
- Margins are thin. At a 15 percent margin, that same $8 of shipping needs over $50 of added sales to cover. The threshold has to climb so high it stops converting.
- Items are heavy or bulky. Furniture, equipment, anything dimensional — shipping cost swings wildly per order, and a flat threshold can’t keep up. Real shipping rates may serve you better.
- You sell mostly single high-ticket items. If people buy one thing and leave, there is no “add another item” behaviour to encourage. A threshold has nothing to work with.
In those cases, honest paid shipping — or free shipping only on a subset of products — often beats a threshold you can’t make the numbers work on.
Find the number that pays
For most stores, free shipping is absolutely worth it — the catch is setting the threshold where the math works. See exactly where your average order value sits relative to a threshold, and what the gap is doing to your margin:
Check whether your free shipping threshold is set right →
Don’t have a threshold yet? Get a benchmark-backed starting point for your niche: