Free Shipping Profitability Calculator
"Free shipping" isn't free — you absorb the cost. See exactly what it costs per order and how much extra volume it needs to drive to break even.
How it works
Formulas used
Profit without free shipping = AOV − Order cost − Fees Profit with free shipping = AOV − Order cost − Fees − Shipping cost Volume uplift needed = Profit without / Profit with − 1
Worked example
$60 average order value, $20 average product cost, $7 shipping cost, no fees:
- Profit without free shipping: $60 − $20 = $40
- Profit with free shipping: $60 − $20 − $7 = $33
- Cost of the offer: $7/order, requiring roughly a +21.2% order-volume increase to break even
Limitations
This does not model the conversion-rate lift free shipping is well documented to drive — it tells you the break-even bar, not whether you'll clear it. Compare against your own A/B test data or industry benchmarks where available.
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Frequently asked questions
Should I raise prices slightly to fund free shipping?
Many sellers build shipping cost into product price and advertise "free shipping" rather than absorbing it as pure margin loss — this calculator shows you exactly how much margin cushion you would need to build in.
Set a free-shipping threshold from order economics
A useful threshold encourages customers to add profitable items while keeping the shipping subsidy below the extra contribution generated. Average order value alone is not enough; product mix and destination costs matter.
Evaluate the threshold
- Compare current basket contribution with expected contribution at the proposed threshold.
- Use real shipping-zone and package-weight data rather than a single best-case rate.
- Test whether a flat shipping discount is safer for expensive destinations.
Policy details
- Oversize products and remote zones may need clear exclusions.
- Returns can leave the final retained basket below the original threshold.
- Threshold messages should state whether tax and gift cards count toward eligibility.