How do I choose a free shipping threshold that does not lose money?

"Free shipping above Rs 499" sounds friendly, but the number is rarely picked with care. Often it is copied from someone else. A threshold that is too low turns every qualifying order into a loss. Here is a simple way to derive yours from your own figures.

The two numbers you need

First, your contribution margin before shipping. This is the share of the selling price left after product cost, packing and payment fees, but before you pay for delivery. Say yours is 40 percent.

Second, what shipping costs you per parcel. Take Rs 70 as an illustration. Use your own average from recent shipments.

Also decide the minimum profit you want to keep on an order after paying for shipping. Say Rs 100.

The inequality

If an order has value T, your contribution before shipping is 0.4 times T. After you absorb Rs 70 of shipping, what remains is 0.4 times T minus 70. You want that to be at least Rs 100.

0.4 times T minus 70 is at least 100 0.4 times T is at least 170 T is at least 425

So the lowest threshold that keeps Rs 100 profit is Rs 425. Check it: 40 percent of 425 is 170, minus 70 is 100. Good.

Rounding to something sensible

Customers are used to round figures. You could pick Rs 449 or Rs 499. At Rs 499:

• Contribution is 0.4 times 499, which is Rs 199.60.
• After Rs 70 shipping, you keep Rs 129.60.

That sits above your floor, which means you have a little room. Never round downwards. A threshold of Rs 399 would leave 0.4 times 399 minus 70, which is Rs 89.60, below your Rs 100 target.

Things that move the answer

• A higher shipping cost to far zones pushes the safe threshold up. If you ship nationwide, use an average that reflects reality and not your closest pincode.
• Heavier products raise shipping. Our post on weight slabs shows how to control it.
• Discount codes eat into contribution. If you run coupons, the threshold may need to rise. See coupons that move stock.
• Returns and cash on delivery costs also change real profit. Read returns and RTO numbers before you finalise.

Should the threshold be above your average order?

A threshold only helps if it nudges customers to add something. That depends on how it compares with what people already spend, which we explore in free shipping threshold versus average order value.

Putting it into your store

Once you have settled on a figure, setting it up is quick. Our guide to changing the free shipping threshold in settings walks you through where to enter it.

Review it regularly

Courier rates, product mix and margins shift. Recompute every few months. Your threshold is not a branding decision frozen in time but an equation you can solve in two minutes with a calculator.

The short version

Write down contribution margin, shipping cost and minimum profit. Solve for T, round up, and test it on a few real orders from last month. If the answer surprises you, you have just saved yourself from a threshold that quietly cost money on every parcel.