What the threshold is meant to do
A free shipping threshold is a commercial lever, not simply a delivery perk. Set at a qualifying order value, it can reduce the friction of paying for delivery while giving the customer a reason to add another product. The intended effect is a larger basket that produces enough additional gross profit to cover the delivery cost and still leave a worthwhile order contribution.
The trade-off is between three outcomes. A lower threshold may qualify more orders and support conversion, but it also means subsidising delivery more often. A higher threshold may protect contribution per order, but some customers may abandon the basket or place a smaller order instead. Basket value is therefore only an input: an added product with little margin, a likely return, or high fulfilment cost may increase revenue without improving contribution. Evaluate the threshold against realised revenue from delivered orders, product costs, delivery costs, refunds and other variable costs. The commercial question is whether the incremental contribution from qualifying baskets justifies the conversion trade-off, not whether the threshold produces the highest average order value.
Finding the lowest safe threshold
Calculate the threshold from delivered orders, using the same order-level basis throughout. Start with product revenue, then subtract variable costs and the delivery cost you absorb when shipping is free:
Contribution = product revenue − variable costs − delivery cost. Variable costs can include product cost, payment fees, packing and other costs that rise with the order. For a £45 order with £18 product cost, £4 payment and packing costs, and £3 delivery, contribution is £20, or 44.4% of revenue. Use revenue excluding VAT where your accounts treat VAT as tax collected, and keep the treatment consistent across every order.
A cost floor is the right first test when the immediate risk is losing money on qualifying orders. The threshold must cover variable costs plus delivery, leaving contribution at zero or above. A margin floor is appropriate when you need each free-shipping order to contribute at least a defined share of revenue. At a 40% target margin, an order with £25 of variable costs and delivery needs at least £25 ÷ (1 − 0.40) = £41.67 in product revenue.
Find the lowest candidate threshold at which the relevant order-level rule holds, rather than applying a flat percentage to total sales. Delivered-order data matters: returned and cancelled orders should not be treated as realised revenue. ORVX calculates realised revenue from delivered orders and derives gross profit, net profit and margins from your product cost model. Use the free pricing calculator to check the arithmetic.
| Measure | Formula | Use it when |
|---|---|---|
| Cost floor | Product revenue − variable costs − delivery cost ≥ £0 | You need to prevent a loss on qualifying orders |
| Margin floor | Contribution ÷ product revenue ≥ target margin | You need a minimum contribution rate on qualifying orders |
Worked example with sample numbers
This example is illustrative. It uses sample numbers for a fragrance store selling in the UK. They are made up to show the method, they are not a benchmark, and your own figures will differ.
Formula: Lowest safe basket = (delivery + packing + fixed fee) / (gross margin rate - percentage fee - minimum margin you will accept).
| Basket without tax | Margin before delivery | After absorbing delivery | Share of basket |
|---|---|---|---|
| £16.87 | £11.78 | £7.50 | 44.5% |
| £22.49 | £15.79 | £11.51 | 51.2% |
| £33.74 | £23.81 | £19.52 | 57.9% |
| £44.98 | £31.83 | £27.54 | 61.2% |
Run the same sum with your own numbers in the free calculator, or browse guides for sellers in the UK and more fragrance guides.
General information only: tax, duty and import rules change and depend on your situation, so check with an accountant or the official source before acting.
Eligible Shopify stores can see these numbers for their own store through the Founding 10,000 offer.
Compare the measures before you choose
These measures answer different questions. Cost recovery asks whether delivery expense is covered; contribution protection asks whether the order remains profitable after variable costs. Round-price convenience is a buying-friction test, while incremental basket value tests whether the threshold changes customer behaviour rather than merely describing existing orders.
Use one as the primary guardrail and the others as checks. A threshold can look attractive on average basket value yet weaken contribution if customers qualify with low-margin products. Review the measures by delivered orders and act only where the chosen threshold supports the store’s economics.
| Measure | What it tells you | When to act on it |
|---|---|---|
| Cost recovery | Whether the qualifying order generates enough value to absorb the delivery subsidy. | Use it when shipping cost is the immediate constraint, especially if delivery charges vary by parcel or destination. |
| Contribution protection | Whether revenue left after product, delivery, payment, returns and other variable costs remains acceptable. | Use it as the margin guardrail when product margins differ materially across fragrances or collections. |
| Round-price convenience | Whether a clean figure, such as £40 rather than £37.50, is easier to understand and communicate. | Use it when two economically similar thresholds produce different customer-facing complexity. |
| Incremental basket value | Whether the threshold encourages additional qualifying revenue compared with orders below it. | Use it when customers commonly sit just below the threshold and the added contribution can offset free delivery. |
Items that lift the basket
The right basket-builder is not automatically the item with the highest selling price. A discovery set can move an order towards the threshold while introducing several scents, but its samples, presentation and packing may leave less contribution than a full-size bottle. A travel spray may be easier to add at checkout, yet its unit margin can differ from both the main fragrance and the set.
Gift packaging works differently. It can lift the order when the purchase is intended as a present, but only if the packaging fee covers its materials and handling. Treat it as a separate product or service in your margin calculation rather than assuming every packaging charge is profit. Complementary products such as candles, body lotion or fragrance-free care products can also help, but compare their product cost, fulfilment cost and return behaviour individually.
For illustration only, if the free-shipping threshold is £50 and a customer has £42 in the basket, a £12 travel size takes the order to £54. The extra £12 does not all count towards the decision: subtract that item’s product cost and any incremental fulfilment or payment cost. If a £15 discovery set has lower contribution than the travel size, it may still be useful for a different customer, but it should not be promoted as an equal economic choice.
Review profitability by product and collection before choosing which items to feature. ORVX shows product-level and collection-level profitability, including gross and net margins, so you can separate genuine basket lift from revenue that adds little profit. Test the customer-facing placement, but judge it using realised order economics rather than attach rate alone.
How to read the worked example
Read the worked example from left to right. First check that every input uses the same basis: delivered orders, the same period, the same VAT treatment, and the same currency. Confirm product selling price or order revenue, discounts, product cost, packaging, payment fees, advertising and delivery cost against your own records. If one figure comes from a different period or includes returns, the threshold calculation is not comparable.
Keep revenue separate from order-level contribution. Revenue is the amount generated by the order; contribution is what remains after the variable costs included in the example. An order can produce £60 of revenue but only £18 of contribution after a £30 product cost, £7 delivery cost and £5 of other variable costs. Free shipping should be judged against that £18, not the £60 headline.
Then change one assumption at a time. If delivery rises from £7 to £9, contribution falls by £2 on each affected order. If more baskets contain lower-margin gift sets, recalculate the weighted product cost rather than applying the original average. Test the threshold against your actual basket mix, then record which input changed and whether the order still covers delivery while preserving contribution.
Sources
- VAT registration: when to register (GOV.UK (HM Revenue & Customs), checked 26 October 2026).
How this page was made: drafted with AI from a brief, then checked by automated rules for arithmetic, sources and duplication. The sample numbers were calculated, not reported.