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Free Shipping: What Threshold Won't Eat the Store's Margin

A teaching model helps calculate the free shipping threshold based on cart margin, variable costs, and subsidies, then test the rule against real orders.

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A package on a scale next to a calculator and coins — calculating the economics of free shipping
In this article

The free shipping threshold is often chosen for a round number: 3,000, 5,000, or 10,000 rubles. But the average order value alone decides nothing. First, you must calculate how much margin remains after the cost of goods, payment processing, packaging, assembly, and the portion of delivery the store covers.

A practical guideline is simple: you can enable free shipping for a specific cart if its margin after variable costs covers the delivery subsidy and leaves the target contribution to fixed costs. Below is a teaching model. It does not promise conversion growth and does not replace a calculation based on your orders.

What exactly we calculate

Let's take a store with a cart containing multiple items. The order price is 6,000 rubles. The procurement cost of the goods is 3,600 rubles. Variable costs for payment, packaging, and assembly are another 420 rubles. Delivery to the customer costs 550 rubles.

Before the delivery subsidy, an order yields 1,980 rubles in margin: 6,000 − 3,600 − 420. If the store fully covers delivery, only 1,430 rubles remain. This is not company profit: from this amount, rent, salaries, development, advertising, and other fixed costs must still be paid.

Threshold formula

Let m be the share of margin before delivery, V the variable costs in rubles, D the average delivery subsidy, and C the desired contribution of one order toward fixed costs. Then the minimum cart value P is calculated as: P = (V + D + C) / m.

Assume products leave 40% of the price after procurement, other variable costs total 420 rubles, the store subsidizes 550 rubles of delivery, and it wants to retain at least 1,200 rubles of contribution. We get: (420 + 550 + 1,200) / 0.40 = 5,425 rubles. A threshold of 5,500 rubles in this educational model provides a small buffer; 5,000 rubles already fails to meet the selected condition.

Three scenarios instead of one average

Let us calculate the same delivery subsidy across different cart margins. This is more important than the average order value: two carts of 6,000 rubles can yield different results for the store.

Scenario

Margin before expenses

Threshold at V=420, D=550, C=1,200

Low

30%

7,234 rubles

Base

40%

5 425 rubles

High

50%

4 340 rubles

Three carts of 6,000 rubles yield different margin after delivery at margins of 30%, 40%, and 50%
The same order amount does not mean the same result: this is an educational calculation.

This leads to an unpleasant but useful conclusion: a single threshold for the entire catalog may subsidize the weakest carts. If categories differ significantly in margin or dimensions, it is better to calculate multiple rules or exceptions rather than hide the difference behind a single average figure.

How many orders will actually receive the benefit

The next step is not to guess how many shoppers will "stretch" their cart to the threshold. Instead, take an order export for a comparable period and recalculate the result for each order against the future rule. Separately note cancellations, returns, different delivery zones, and orders containing excluded items.

Training example: 800 paid orders were placed in a month. A new threshold would have been met by 240 of them. The average subsidy for this group is 550 rubles. The direct budget for the program would be 132,000 rubles: 240 × 550. If 150 of these orders already received a discount or free delivery without the promotion, they cannot be counted as a new result.

Free delivery budget calculation: 240 orders at 550 rubles each and a break-even point of approximately 93 new orders
132,000 rubles is the subsidy budget; approximately 93 orders is the calculated break-even point, not a forecast.

To recoup the additional 132,000 rubles with an average contribution of 1,430 rubles per new order, approximately 93 additional orders are needed: 132,000 / 1,430 = 92.3. We round up because partial orders do not exist. This is the break-even point for the subsidy in the training model, not a sales forecast.

What to check before launch

  • The threshold is calculated based on the total value of goods before or after discounts and bonuses.
  • Whether delivery costs are included in the total that determines eligibility for the benefit.
  • Which regions, delivery methods, dimensions, and categories are excluded.
  • Whether the condition is recalculated in case of a partial return or cancellation of an item.
  • What happens if the delivery cost changes after the address is selected.
  • How the free delivery condition interacts with promo codes and loyalty program discounts.

For acceptance testing, a set of control carts is sufficient: one ruble below the threshold, exactly at the threshold, one ruble above the threshold, with a discount, with an excluded item, with a high-cost delivery zone, and with a partial return. For each scenario, the expected goods total, delivery cost, store subsidy, and final payment amount are recorded in advance.

How to evaluate the results

After launch, compare not only the average order value. You also need the share of orders with the benefit, the average subsidy, the contribution of the order after delivery, the number of paid orders, and returns. The comparison periods must be comparable in terms of advertising, assortment, prices, and seasonality; otherwise, a change can easily be attributed to the threshold when the cause was something else.

If the order contribution after delivery has decreased, first check the composition of the carts and the regions, rather than immediately raising the threshold. It is possible that the benefit is being applied too frequently to heavy items, distant zones, or on top of another discount. A single overall metric will not reveal this.

The working threshold is the one whose assumptions are visible and verified against real orders. In the educational model, this is 5,500 rubles with a 40% margin, 550 rubles in subsidies, and a target contribution of 1,200 rubles. For a different catalog, region, and expense structure, the number will be different; there is no guarantee of order growth or payback here.

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