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Guide

How to set a free shipping threshold

What should your free shipping threshold be?

6 min read

Short answer

Start from your average order value and add the fee you stop collecting divided by the share of each sale you keep. If your average order is ₹1,200, you keep 40% and you charge ₹80 for shipping, a shopper must add ₹200 for the order to pay for itself, so the lowest threshold that works is ₹1,400. Round up to a clean target such as ₹1,499.

What free shipping really costs

The courier is paid whether shipping is free or not. What free shipping costs you is the fee you used to collect from the shopper. At a ₹80 fee, that is ₹80 on every order the offer applies to.

Each extra rupee a shopper adds to the cart earns you your margin. At 40%, a ₹200 larger cart earns ₹80, which wins the fee back exactly.

The formula

Extra the shopper must add = fee / margin. Lowest threshold = average order value + that extra.

With a ₹1,200 average order, 40% margin and ₹80 fee: extra = 80 / 0.40 = ₹200, so the lowest threshold is ₹1,400. Round up to the next price ending in 99 and you get ₹1,499.

Never round down. A threshold below the lowest working figure loses money on every shopper who is nudged.

The trap: a threshold near your average order

If the threshold sits at or below your average order, most shoppers qualify without adding anything. You give up the fee on all of them and gain nothing.

Even a threshold above average gives away the fee on orders that were already above it. That cost is real, which is why the monthly view matters.

The monthly check

Take your monthly orders, the share already above the threshold, and the share of smaller carts you expect to stretch to reach it. The gain is what the stretched carts earn beyond the fee. The cost is the fee on every order that was already above.

The share who will stretch is a guess, so try a low and a high number. The calculator also shows the share you would need to hit for the threshold to break even. If that share looks unrealistic, set the threshold higher.

Keep the number in one place

The threshold lives in your shipping rates, your policy pages, your banner and your product feed. When one is stale, shoppers see two offers. Change them together.

Test a threshold for a few weeks and watch average order value, then enter what you saw into the calculator and decide again.

Free shipping threshold calculator →Free COD return (RTO) loss calculator →COD vs prepaid: what each order really costs →

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