How the threshold is set
A free shipping threshold is the cart value where shipping becomes free: “Free shipping over $100.” Set it right and shoppers add a second item to qualify, lifting average order value. Set it wrong and you either subsidize orders that would have happened anyway, or post a bar nobody reaches.
Cart lift that covers the subsidy = Shipping cost ÷ contribution margin rate
The first formula places the bar 20 to 30% above your current AOV, the range most DTC operators use as a starting point. Treat it as directional, not a law. The second formula is the guardrail: it computes how much extra cart value a qualifying order needs before its margin pays for the shipping you just gave away.
Worked example
Take the calculator's defaults: an $80 AOV, $8 to ship an order, a 55% contribution margin, and a 25% uplift target.
$8 ÷ 0.55 = $14.55 of extra cart value covers the subsidy
The bar lands at $100, already a clean multiple of $5. Every order that qualifies costs you the $8.00 subsidy. A cart that stretches from $80 to $100 adds $20 of value, and at a 55% margin that $20 returns $11 of contribution. You pay $8 for the shipping and keep $3 per converted order, before counting the conversion lift from the offer itself.
Why 20 to 30% above AOV, and why reachable beats aspirational
The heuristic exists because of how carts actually behave. A shopper at $80 will add a $15 or $20 item to unlock free shipping. The same shopper will not double the cart to hit a $160 bar; they will pay the shipping or leave. The threshold only works when the gap feels closable in one add-to-cart.
Below 20% the bar sits inside your existing order distribution. Most carts already qualify, so you subsidize behavior you were getting for free and AOV barely moves. Above roughly 40% the bar reads as unreachable, and unreachable thresholds convert worse than no offer at all. The 20 to 30% band is directional, but the shape of the tradeoff is not: too low burns margin, too high burns the offer.
One more check before you commit: look at where your order values cluster, not just the average. If a $60 best seller drives most orders, a $100 bar asks for a $40 stretch, not the $20 the average implies.
The margin math: when the subsidy pays for itself
Free shipping is a discount that hides in your fulfillment line. The honest way to judge it is the same way you judge any discount: how much extra contribution does it have to create to cover its cost?
The answer is shipping cost divided by margin rate. In the example, $8 of shipping at a 55% margin needs $14.55 of extra cart value per qualifying order. That is the floor. The $100 threshold asks carts to grow by $20, comfortably above it, which is why the default setup nets $3 per converted order rather than breaking even.
Run the same check whenever you drag the sliders. At a 30% margin the cover value jumps to $26.67, and a $20 gap no longer pays for itself. Thin-margin brands need either a higher uplift, a cheaper shipping method behind the offer, or a minimum that also nets out the carrier bill. The calculator's cover value tells you which side of the line you are on before a single order ships.
Round to a clean number, then test it
Thresholds are marketing copy, not accounting entries. $100 beats $103.75 on every banner, so the calculator snaps suggestions to the nearest $5. If the rounded number lands awkwardly against your catalog, round toward a price point a real product combination can hit.
Then treat the launch as a test, not a decree. Watch two numbers for at least two weeks: AOV and conversion rate. A good threshold moves AOV up without dragging conversion down. Baseline both before you flip the switch. Use the AOV Calculator to model the cart lift, and the Conversion Rate Calculator to price a fraction of a point of conversion against the subsidy.
Frequently asked questions
Where should I set my free shipping threshold?
Start 20 to 30% above your current AOV, rounded to a clean number, and confirm the gap clears your cover value (shipping cost divided by margin rate). Both checks matter: the first makes the bar reachable, the second makes it profitable. Then validate against your order-value distribution so the bar is one add-to-cart away for a typical shopper.
Does free shipping beat a percentage discount?
Usually, dollar for dollar. An $8 shipping subsidy on a $100 order costs 8% of revenue, while a 10% discount costs $10 and trains customers to wait for sales. Free shipping also removes the single most cited checkout objection instead of just lowering the price. Compare the two with the Discount Break-Even Calculator: run the discount there, run the subsidy here, and keep the cheaper lever.
What if my AOV is close to my best seller's price?
That means most orders are single-item, and the threshold becomes a cross-sell engine. Set the bar so your best seller plus one small add-on clears it, then merchandise that add-on at the cart. If a $75 hero product dominates, a $95 bar with a $20 accessory rack works; a $150 bar just gets ignored.
Should the threshold apply to the discounted or full cart value?
Qualify on the post-discount subtotal. Stacking free shipping on top of a coupon judged at full price double-dips your margin: a $100 cart with 20% off is an $80 order wearing a $100 costume. Most carts default to post-discount qualification, but audit yours, especially during sitewide sales when every order carries a code.
How do I measure whether the threshold worked?
Compare four weeks before against four weeks after on three numbers: AOV, conversion rate, and contribution margin per order. The win condition is AOV up, conversion flat or better, and margin per order at least holding once the subsidy is netted out. If AOV rose but margin fell, the bar is too close to your existing carts; raise it or renegotiate the shipping rate behind it.
Where StefanBrain fits
A threshold only earns money if shoppers see it and stretch for it. StefanBrain generates the ads, landing pages, and bundle angles that merchandise the offer: the “$20 away from free shipping” creative, the add-on placements, the copy tests. And before you set the bar, make sure the margin number you fed this page is real; the Contribution Margin Calculator builds it from your actual per-order costs.