---
title: "Free-shipping threshold: definition and formula"
description: "The order value above which shipping is free. It costs the shipping revenue of every order already above it, and pays only if enough smaller orders top up."
url: https://offersuite.io/glossary/free-shipping-threshold
updated: 2026-10-13
---

# Free-shipping threshold

The order value above which shipping is free. It costs the shipping revenue of every order already above it, and pays only if enough smaller orders top up.

## In plain words

A free-shipping threshold is the order value at which shipping stops being charged. It is meant to make customers add to their cart to reach it.

It has a cost that is easy to miss. Every order that was already above the threshold stops paying for shipping and buys nothing more. That lost shipping revenue is the threshold's subsidy, and the threshold pays only if enough smaller orders top up by enough to cover it.

## Formula

- Subsidy = orders already at or above the threshold × shipping they no longer pay
- Gain per top-up = (threshold − order value) × product margin − the shipping it no longer pays

## Worked example

With 980 orders a month and $7.00 shipping, a $50.00 threshold gives away $1,680.00 a month on orders already above it. Even if every smaller order topped up, they would add $1,585.00.

At $75.00 the subsidy is $280.00, and 2.4% of smaller orders topping up pays for it.

### The example order

A $40.00 bag of coffee, shipped free, every cost counted

Revenue $40.00 to contribution margin $15.36 (38.4%)

Revenue

$40.00

Cost of goods

−$12.00

Pick and pack

−$1.18

Packaging

−$0.50

Shipping label

−$7.50

Card fee per order

−$0.30

Refunds

−$2.00

Card processing

−$1.16

Contribution margin

$15.36

2 declared kinds cost nothing on this option

Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.

## The threshold is not average order value plus shipping over margin

That rule of thumb sets a level without asking what the level costs. It ignores how many orders already sit above it, which is the threshold's whole cost. Two stores with the same average order can need very different thresholds.

## Using it

Start from your orders by value, not from the average. Count the orders already above each candidate level, work out what the threshold would give away on them, and compare that with what the orders just below could add by topping up. Try several levels: the best one is often higher than the rule of thumb suggests.

## Related

- [Glossary **Glossary of offer economics** The terms behind offer profit, defined plainly with their formulas and a worked number: contribution margin, profit per visitor, break-even lift and more.](https://offersuite.io/glossary)
- [Calculator **Free shipping threshold calculator** Price a free-shipping threshold with the shipping you give away on orders that already reach it, and the share of smaller orders that must top up to pay for it.](https://offersuite.io/calculators/free-shipping-threshold)
- [Glossary **Average order value (AOV): definition and formula** Total order revenue divided by the number of orders. Useful for spotting a trend, misleading for setting thresholds because it hides the shape of your orders.](https://offersuite.io/glossary/average-order-value)
- [Glossary **Fulfilment cost: definition, formula and example** What it costs to get an order out: pick and pack, extra picks, the box and the label. Charged per order or parcel, which is why bundles and gifts change it.](https://offersuite.io/glossary/fulfilment-cost)
- [Glossary **Contribution margin: definition and formula** What an order keeps after every cost that grows with it: product cost, fulfilment, shipping, card fees and refunds. The number an offer should be judged on.](https://offersuite.io/glossary/contribution-margin)
- [Playbook **Free shipping threshold for coffee brands** Free shipping for coffee brands on USPS's published label prices: what it gives away on orders that already qualify, and what a top-up earns.](https://offersuite.io/playbooks/free-shipping-threshold-for-coffee-brands)