Every example and amount on this page is illustrative. It shows the method and is not a benchmark, a quote or advice.
What the Threshold Is Meant to Do
A free-shipping threshold is the basket value at which you stop charging for delivery. For a UK makeup store, it is a trade-off: a higher threshold can encourage customers to add a product, while a lower one may increase uptake but subsidise more deliveries. It works when the extra order contribution from larger baskets covers the delivery subsidy without eroding profit.
As an illustration only, suppose a £28 delivered order produces £28 of realised revenue, has £18 of product cost and £6 of advertising cost. Before delivery, its contribution is £4. If delivery costs you £3.95 and you make shipping free, only £0.05 remains. Judge a threshold by the order economics it creates, not the percentage of customers who qualify: the same threshold may suit one product mix and be loss-making for another.
ORVX shows product- and collection-level profitability, computes gross and net profit from your product cost model, and reports contribution after advertising. Assess the threshold against delivered orders and actual product economics, not revenue alone. Use the free product pricing calculator to test the arithmetic before deciding what the incentive is worth.
The Measures Behind the Decision
Use average order value (AOV) to understand basket behaviour, not to decide profitability on its own. Calculate it from realised revenue divided by delivered orders; excluding cancelled and returned orders prevents the average being overstated. A threshold near AOV may affect many shoppers, but that does not mean those orders cover free delivery.
Contribution margin shows what remains after variable costs, while delivery cost per order shows the subsidy created by free shipping. Incremental profit is the decision measure: compare the extra contribution from orders that qualify with the delivery cost and any extra fulfilment or product costs. Act on it when the threshold changes profit, rather than merely increasing revenue or AOV.
| Measure | What it is for | When it should guide action |
|---|---|---|
| Average order value | Shows typical delivered basket size and how close customers are to the threshold. | Use to assess basket distance and likely customer friction; do not use alone to set the threshold. |
| Contribution margin | Shows the amount left after variable selling costs to help fund delivery and profit. | Use when checking whether qualifying baskets have enough economics to absorb shipping. |
| Delivery cost per order | Shows the actual fulfilment cost the store would subsidise. | Use when estimating the cost of each free-shipping order, including destination or service differences. |
| Incremental profit | Compares added contribution with added delivery subsidy and other variable costs. | Use for the final commercial decision after comparing threshold orders with the existing baseline. |
Worked example with sample numbers
This example uses sample numbers for a makeup 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 |
|---|---|---|---|
| £25.62 | £18.13 | £14.29 | 55.8% |
| £34.16 | £24.26 | £20.41 | 59.8% |
| £51.24 | £36.50 | £32.66 | 63.7% |
| £68.32 | £48.75 | £44.91 | 65.7% |
Run the same sum with your own numbers in the free calculator, or browse guides for sellers in the UK and more makeup 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.
Finding the Lowest Safe Threshold
Start with your own unit economics, not a UK market benchmark. For each candidate threshold, use a realistic basket at or just above that value and subtract product cost, payment fees, packaging, fulfilment, and the delivery cost the store absorbs. Include customer-paid delivery where it still applies; the question is how much of each order the threshold leaves to cover marketing, overhead and profit.
For illustration only, a £35 basket with £14 product cost, £1.20 payment fees, £0.80 packaging, £3.50 fulfilment and £4.50 absorbed delivery produces £11.00 before advertising: £35 − £14 − £1.20 − £0.80 − £3.50 − £4.50. A £25 threshold may attract more qualifying orders but be unsafe if the typical qualifying basket contains lower-margin products or higher delivery costs. Test several thresholds using your actual product mix, not one high-margin SKU.
Treat gross margin as a screening measure and contribution per delivered order as the decision measure. ORVX calculates realised revenue from delivered orders only and uses your product cost model to show gross and net profit and margins. Add your operational costs to the free pricing calculator, then choose the lowest candidate that still meets your required contribution floor across realistic baskets.
Items That Lift the Basket
Prioritise inexpensive-to-fulfil, high-margin add-ons: lip liner beside lipstick, brow gel beside a brow pencil, or a mini brush set beside complexion products. A £4 add-on with an £0.80 product cost contributes £3.
How to Read the Worked Example
Read the worked example in three passes. First, identify the inputs: the basket’s realised sales value, product cost, payment fees, delivery cost absorbed by the store, and any advertising cost assigned to the order. Check that the basket represents a delivered order, rather than treating a cancelled or returned order as revenue.
Next, compare the basket value with the proposed free-shipping threshold. If it reaches the threshold, the customer’s delivery charge becomes zero and the store carries that fulfilment cost. If it falls below the threshold, the customer pays the stated delivery charge, so the store’s contribution is calculated on a different basis. The comparison is about eligibility first; it is not evidence that every customer will increase their basket.
Finally, follow the subtraction through to contribution: realised revenue less product cost, payment fees, delivery cost and advertising. Read the resulting amount alongside the threshold decision. A basket can qualify for free delivery and still contribute too little after variable costs; a basket below the threshold can contribute more if the delivery charge covers its fulfilment cost.
Measuring the Result After Launch
Record a comparable pre-launch baseline, then review the same measures after launch by order cohort. Use delivered orders for realised revenue, and allow time for cancellations and returns to appear. Compare similar trading periods where possible, since a promotion or payday spike can distort the result.
The threshold is working only if the extra basket value pays for the delivery subsidy and any added product or return risk. Review the measures together rather than treating a higher basket value as success on its own.
| Measure | What it shows | When to act |
|---|---|---|
| Qualifying-order rate | Free-shipping orders ÷ eligible delivered orders. Shows how often you absorb delivery. | If it rises sharply without higher contribution per order, test a higher threshold. |
| Basket value | Realised revenue ÷ delivered orders. Shows whether shoppers add items to qualify. | Act when the increase is smaller than the added delivery cost and product cost. |
| Delivery cost | Delivery cost absorbed per delivered order, including qualifying orders. | Investigate carrier, packaging or threshold effects when cost rises. |
| Contribution per order | Revenue less product, payment, delivery and advertising costs, using one consistent definition. | Use this as the primary profitability decision measure. |
| Cancellations and returns | Cancelled orders and returned units or refund value against revenue. | Recheck the threshold if qualifying baskets produce more failed or refunded sales. |
A sustainable free-shipping threshold is the lowest order value at which the added basket contribution can cover the delivery support and other variable costs. Use the worked calculation to set the boundary, then use order-level reporting to decide whether the policy should stay, move or be replaced by a different offer.
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.