Where should your free-shipping threshold actually sit?

Set it too low and you pay shipping on orders you already had. Set it too high and nobody stretches. The zone that moves cart size is 1.2 to 1.4 times your AOV, priced against what absorbing shipping really costs you. Answer four questions and get your number, with the break-even math shown.

4 inputs~45 secondsNo email to see your number

✓ See your recommended threshold and break-even lift instantly. No signup to view your result.

By Taylor Sicard · co-founded WIN Brands Group and scaled it to mid nine figures · the same threshold math tested across the brands I've operated and advised

WHERE SHOULD A FREE-SHIPPING THRESHOLD SIT?

A free-shipping threshold is an AOV lever, so it gets set as a multiple of AOV rather than as a round number that looks nice. The zone that changes cart behaviour is 1.2 to 1.4 times average order value, with about 1.3x rounded to a clean figure as the starting point. Then price it: divide your shipping cost by your gross margin and you have the extra order value each qualifying cart must add to pay for the shipping you just absorbed.

Formula: suggested threshold = AOV x 1.3, rounded to the nearest $5. The zone to test inside is AOV x 1.2 to AOV x 1.4.
Break-even lift = average outbound shipping cost per order divided by gross margin, in dollars of extra order value per qualifying order.
Inputs: average order value, gross margin %, average outbound shipping cost per order, and your current threshold if you have one.
Rule of thumb: a threshold below your AOV gives money away, because you are paying shipping on orders you already had. Above roughly 1.6x AOV, almost nobody stretches.
Common mistake: setting the threshold and never pricing it. If the break-even lift is bigger than the stretch the threshold asks for, the offer costs more in absorbed shipping than it adds in contribution.

Worked example. AOV $72, gross margin 55%, outbound shipping $8.50 an order. The zone runs 72 x 1.2 = $86.40 to 72 x 1.4 = $100.80, and 72 x 1.3 = $93.60 rounds to a $95 threshold. Break-even lift is 8.50 / 0.55 = $15.45, about 21% of AOV. The threshold asks for a $23 stretch, so $15.45 of that goes to paying for the shipping and only the remainder is gain.

Source: Taylor Sicard, Taylor Sicard Consulting · Updated August 2026

The method behind the number

The margin math a threshold has to clear.

Consumer Commerce

Contribution margin per order

Where absorbed shipping lands in the per-order P&L, and what it does to contribution.

Read post →

Consumer Commerce

Contribution margin for DTC

CM1, CM2, CM3 defined, and why the margin Shopify shows you stops two layers too early.

Read post →

Consumer Commerce

The LTV math brands get wrong

Why AOV levers like thresholds compound into LTV, and where the math usually breaks.

Read post →

Method

How the number is calculated

Two calculations. The placement: 1.2 to 1.4 times your AOV is the zone where a threshold changes behaviour, and the tool suggests a clean number near 1.3x, rounded to the nearest $5. The affordability: your average shipping cost divided by your gross margin is the extra AOV a qualifying order must add for the offer to pay for itself. The zone is an operator rule from the brands I've operated and advised: treat it as the starting point to test around, not a law.

Threshold 1.2 to 1.4x your AOVReachable stretch. This is the zone that moves cart size.

Between your AOV and 1.2x, or above 1.6xEither too easy or too far to change behaviour. Nudge it into the zone.

Below your AOVYou are paying shipping on orders you already had. Move it or drop it.

A threshold is an AOV lever, not a conversion cure: the checkout side of the story lives in the conversion revenue-leak calculator, and if returns are eating the margin the threshold protects, run the returns cost calculator next. All of the free DTC calculators share these benchmarks.

Questions

Common questions

What should my free-shipping threshold be?

1.2 to 1.4 times your average order value, rounded to a clean number. Across the brands I've operated and advised, that zone is the reachable stretch: close enough that shoppers add one more item to qualify, far enough that you are not giving shipping away on orders you already had. This calculator suggests a rounded number near 1.3x.

Why 1.2 to 1.4 times AOV?

Below your AOV, most orders qualify without changing behaviour, so you absorb shipping cost for nothing. Much above 1.6x, the stretch is too far and shoppers ignore it. The 1.2 to 1.4x band is where a threshold actually moves cart size. It is an operator rule from the brands I've operated and advised, not a law of physics, so treat it as the starting point to test around.

How do I know if absorbing shipping breaks even?

Divide your average outbound shipping cost by your gross margin. At $8.50 shipping and a 55% gross margin, a qualifying order needs $15.45 of extra AOV to pay for its own shipping. If the threshold lifts qualifying orders by more than that, the offer funds itself. If not, it is a discount wearing a costume.

Should I offer free shipping at all?

Your margin structure decides, not your competitors. Run the lift-needed number from this calculator: if your gross margin is thin and your shipping cost is heavy, the AOV lift required may be more than a threshold can realistically produce. In that case, build shipping into the price or use a flat rate instead of absorbing it.

Is a threshold better than flat-rate shipping?

They solve different problems. A threshold is an AOV lever: it exists to pull carts up to a number. Flat-rate is a conversion lever: it removes surprise at checkout without giving shipping away on every order. Thin-margin, low-AOV brands often do better with flat-rate; brands with a plausible add-one-more-item path do better with a threshold.

Does free shipping increase conversion?

Unexpected shipping cost is the most commonly stated reason shoppers abandon carts, so removing it helps conversion. But the margin math still has to clear: a conversion lift that costs more in absorbed shipping than it adds in contribution is a loss. Judge both sides; the conversion revenue-leak calculator covers the conversion half.